All Forum Posts by: Robert DelVecchio

My vacancy was 2 weeks, but that is really only because i needed to get the house painted and new carpet installed.  I did all the work myself, so it took a bit longer.  It made more sense to me to leave it vacant for 2 weeks while I did the work than to pay someone to get the work done faster. 

Good morning everyone.  I'm interested in your thoughts on a town home I made an offer on.  The seller has it listed at $155,000. I put an offer in for $145,000 and the seller pays 2% of the closing costs.  The seller said my offer was offensive btw.  

Here are the numbers ran at $150,00 which is what her counter offer is and with a interest rate of 5.5% on a conventional 30 year loan.  

Cash on Cash Return - 10.19%

Thanks in advance for your thoughts - Robert

Return (IRR): 11.73% per year Total Profit when Sold: $217,855.15 Cash on Cash Return: 660.17% Capitalization Rate: 7.69% Total Rental Income: $471,420.00 Total Mortgage Payments: $245,284.85 Total Expenses: $125,280.00 Total Net Operating Income: $346,140.00

First Year Income and Expense Monthly Annual Income: $1,350.00 $16,200.00 Mortgage Pay: $681.35 $8,176.16 Vacancy (3%): $40.50 $486.00 Property Tax: $102.17 $1,226.00 Total Insurance: $62.50 $750.00 HOA Fee: $166.67 $2,000.00 Maintenance Cost: $16.67 $200.00 Cash Flow: $280.15 $3,361.84 Net Operating Income (NOI): $961.50 $11,538.00

Some new information on the comp i found on Zillow. I believe it was sold by owner, which would account for it now showing up in MLS.

I still think the fact it was pending at $145,000 (which meant an offer was made), then sold for $140,000 means it didn't appraise.  The comp is nicer than the property im looking at. 

Im thinking of offering $145,000 and expect it to actually sell for $140,000. Plus I can walk away if it doesn't appraise.

Ok!!! So its been one year since I started with my first rental property. I want to share my story as I think it may help others who find themselves in a similar situation.  I bought my first house at 25 for $179,000.  I put down roughly $59,000 and financed $120,000. Two years ago I refinanced the property on a 15 year loan and 1 year ago my wife and I built a new home.  

It took me almost the entire time our house was being built to decide if I was going to rent my first home or sell it.  I was weighing the pros and cons, writing them out and doing more math, calculating and analyzing than a Nasa scientist. If I decided to sell the property, it would have sold for around $190,000 and I would have walked away with 84K. If I rented it, I would make around 10K a year (cash flow and equity). The big question and unknown variable was, could I find a great tenant??? 

After a considerable amount of research and talks with my wife, we decided to rent it. I rented the property for $1395.00 with a mortgage of around $950.00. I cover trash, lawn maintenance and leaf removal, which runs me about $500 a year. This was a must for me because it took care of one of my main fears, the tenant wouldn't take care of the yard.  Peace of mind is worth $500 to me. 

Here is how the last year has played out for me. 

- I found a great tenant who pays on time. I researched (credit & background) everyone who applied. Spend time finding the right person, it PAYS off for sure.

- I have had 0 problems. Including 0 calls from the tenant and 0 maintenance issues.

- I will be hand delivering a thank you note with a $50 gift card to Bonefish to my tenant during my 1 year inspection of the property. I've never seen where people do this on here, but i think its a great idea to thank my customer for being a great customer. 

In the end, I am extremely happy that we decided to rent the property. I am now looking at buying another rental with a long term goal of owning 10. If all rentals are purchased right, 10 would bring in roughly 40K to 50K of passive income.  That wouldnt be enough for me to retire, but it sure would be nice to allow my wife and I to live the way we want!

My advice to anyone who finds themselves in my situation and dont know if you should rent it or sell it, here is what I have to say. Do your reseach and make sure it makes financial sense. If you cant afford it or need the money you would generate from selling it for another property, sell it!!! You have to put the work in and it has to feel right. That means you have logically believe it is a good decision and your senses have to say you will enjoy the responsibilities of being a landlord.  

 If anyone has questions about my first property or want to know more about my thinking when I decided to rent it, please let me know.  

Robert 

As a real estate investor, what do you look for when you are analyzing cash on cash return and cash flow.  What is considered good, great. bad and ugly?  

Congratulations on your first deal. Keep being awesome!!!

I recently a property that would be a great buy and hold property at $150,000. The only problem is... After looking at comps on Zillow that sold in the last 6 months, it looks like similar properties sold for $135 to $140. I checked MLS and these properties dont show up there, but they are on Zillow.

Whats the deal here. If they sold and are Zillow, they should be in MLS correct? Here are some other thoughts.

I dont think the property will appraise for more than $140,00 since 20 days ago a property exactly like, if not nicer only sold for $140,000.  The tell tale sign is that it was pending at $145,000 but the closed at $140,00 which tells me it didnt appraise.  

Is there any gap in my logic here?

So Ive been searching MLS for comps to compare a buy and hold rental to. I have successfully found houses that sold in the last 6 months on Zillow, but I can’t seem to locate them in MLS. Can anyone tell me why this would be? What am I missing. I thought MLS housed all real estate purchases. Thanks for all your help here.

Thank you to everyone who has replied. I appreciate your thoughts here. 

Repairs - Because the house was just remodeled completely I added in 3%

Vacancy - This townhome is in a hot area for rentals, less than 5 minutes from a top hospital and in a nice area overall. I added 3% which is on the low end.

Management - I will be managing this property myself

The property taxes were calculated by taking the (2017 county assessment * .95 tax rate) = 1186.00

Is the below cash-flow and cash on cash ROI good, great, bad or ugly?

After adding in repairs and vacancy here is how things add up.

$1,350.00MONTHLY INCOME

$1,073.48MONTHLY EXPENSES

$276.52MONTHLY CASHFLOW

7.51%PRO FORMA CAP

$11,270.00NOI

$34,000.00TOTAL CASH NEEDED

9.76%CASH ON CASH ROI

7.51%PURCHASE CAP RATE

I would not be using property management for this property