All Forum Posts by: Rob Anderson

Sounds like you are also a little emotionally attached to this particular purchase. Its hard not to be when you are buying owner occupied. But id agree and say at least hold off and see if the other deal goes threw. Keep us Informed!!

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Yea local banks will probably net you the most help. Keep us up to date on the Purchase Price. REO properties don't "Usually" flex on price like the numbers you are speaking of. So I would be interested to hear the outcome! Good luck

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IF the the numbers are correct, than this looks like a deal. But thats a big IF. In my area a duplex around 75k-100k isnt bringing in anywhere near $2200 a month but I know that it is possible. And I second Aaron in the taxes seeming EXTREMELY high. In Champaign you would be above 250k purchase price to get in the $6600 property tax. But Id say go for it.

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You are on point on everything. Your problem is timing. A flip like this needs to be put on the market in Spring or Summer. People in illinois don't move in winter unless they have to. So you have to be lucky and find a motivated buyer from most likely out of the area or have a price thats worth moving a king size bed in the snow.

Ps: I live in Champaign IL. When I buy my next house for myself I want you to come down and rehab it for me. This place is awesome.

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Originally posted by @Robert Steele:

@Rob Anderson Sure, sure, I get it. But just as underestimating your expenses can be detrimental so too can overestimating. You might walk away from a perfectly good deal because the cash flow appears too thin.

Which brings me to another point I'd like to make and that is; cash flow ain't the be all and end all of assessing whether a property is a good buy or not. I am probably going to get lambasted for saying that but I am not talking about banking on capital appreciation.

For instance, where in this equation is buying a new house versus an old house? A new house is not going to need as much capex as an old house. What about rent projections? A house in a tired old neighborhood may not see rents rise as much as a house in an up and coming area a few years down the road.

For example, I bought a near new house, REO, back in 2010 in a new development that was on the edge of town. They were still building houses in the neighborhood. Rent was $1300. A couple of years later and the city has expanded, there are new schools nearby, a new hospital down the road, new business popping up everywhere and affluent people moving into the area. The rent is now $1650. My expenses have largely remained unchanged. When I bought it the cash flow was maybe $100. Now it is $450.

I know a lot of people think buying a house that barely cash flows is nuts but I believe we have been wrongly conditioned to think cash flow is king. I think that is short sighted. If you have enough capital reserves and you don't need the cash flow today but do expect to need cash flow in the future for retirement than I think you should be focusing on the future cash flow and not so fixated with today.

Flame on!

No Flame. You bring up a few good points on new vs old and the lack of calculations on that part. But that is what separates a good investor from a computer program. Not everything that goes in to the purchase of a good investment property can be quantified. I agree with that. BUT BUT BUT. I am an investor. By definition that means expending money with the expectation of achieving profit. To purchase a property that doesn't make since financially now because you believe in the future it could is ludicrous. When there are so many deals out there that can see great cashflow now and STILL see that potential to grow in the future.

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@Robert Steele I'm sure @Kenneth Hynes typically does not have a 10% Vacancy. BUT!!! That is indeed the suggested rate to factor cost. The idea being if you can plug in worst case scenario and still make an 8-12% you should be in a good investment.

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I will definitely be there. Hopefully right at six if not shortly after. Look forward to meeting everyone!

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A little history. This will not be my first Investment Property but it will be my first Multi Family. Place is in pretty bad shape inside. Unkept by current Renters and will need hard refresh when they leave. Renters are long term. A unit has lived there for 3 years and is month to month but has no intentions of moving as of right now. B unit is Sec 8 and has lived in the unit for 10yrs and has no intentions of leaving. Bones are good. Roof is good. Siding is not appealing but is decent. Checked both Tenants background and all looked good.Property is 30Min away from the town I live in. OK on to the numbers.

Asking Price: $59990

Est: Repairs:$15000 Not Immediate(Post Current Tenants)

ARV:$89000

Taxes: $2399

Sewage: $35

Garbage: $35

Purchase Price- $50000

Out of Pocket- $9000(Down + Closing&Misc)

Amount Financed- $42500

NOI= 14400 (gross rents)*.88(Gross Income Adj. For Vacancy)= 12672- 2399(taxes)- 420(garbage)- 420(sewage)- 600(insurance) 1500(Maintenance & Repairs) = 7333

NOI= $7333.00

Cash Flow= NOI(7333) - Debt Services(3828)AM15yrs=3504

Yearly ROI= 14.6% (9000down+15000rehab)/3504(cashflow) Factored rehab cost into ROI to get a true number. Even though these cost may be deferred for years to come.

Cap Rate= 7333(noi)/65000 (purchase price+Est Repairs)= 11.3%

This is my first time sitting down and really crunching numbers and so im sure ive made mistakes. If you catch them please let me know.

So..... What do you think?

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Thank you @Bill Gulley As always a fast and helpful response!

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Originally posted by @Bill Gulley:

The costs of a LMO and servicer are variable costs, per deal, those can be passed off to the buyer. The issue is not your costs for each deal as much as being in compliance as a dealer. If you can get someone to bring your operation into compliance for X dollars you can figure out what each deal needs to clear based on you volume and contributions to fixed costs.

And, I see many saying that investors need to get a mortgage license, not so quick, just having a license doesn't mean you can sit there and approve your own transactions.

Another approach too is to partner with a dozen other small investors to get with a servicer and LMO to provide a larger volume of business than anyone investor could produce. A separate entity such as a holding company of 20 different entities might be a good way to go. :)

In regards to being a dealer. In the state of Illinois I believe you can sell up to 4 per year without a dealers licence. So, If one was to sell only 3 a year and use an LMO and servicer to do those deals. Would they still need to be a dealer and have the worries of being in compliance. I apologize if this is a silly question. Just trying to understand if I can legally continue to buy and sell a few of these deals a year.

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All Forum Posts by: Rob Anderson

Rob Anderson has started 6 posts and replied 111 times.

Post: Need some advice FAST

Post: Conventional financing mimimum loan amount?

Post: Owner occupied duplex

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Post: Purchasing my first rental property - Should I create an entity?

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