All Forum Posts by: Ronald Allen Barney

Multi-family and turn-key units are pretty much tapped out for inventory in this area. SFH rehabs there is still pretty strong inventory, the catch-22 being good contractors are almost extinct out of the market. Anyone who can move their own rehab teams into the area can become the SFH king, with good cash-flow.

Assuming no rehab that puts NOI at 61,000/year.

For a 10% cash on cash return up to 610k cash would make it a worthwhile investment.  If there is rehab subtract from max cash outlay.

If you go with financing add mortgage and interest to the expense column for whatever product and reduce cash outlay on the other side to see how that balances out.

I would say for the very first one mitigate risk as much as possible.  That may or may not amount to lower sale price.

Thoroughly check the title.

Walk through it with contractors who know what they're looking at.

Investigate all aspects of any financing you're getting into, and their implications.

Lowball the offer, not to a ridiculous range but just about the range that makes you feel slightly uncomfortable offering.  You can always up the offer later.  Know the offer limit for what would still cash flow given comparable rents in the area.

Best case scenario nothing at all goes wrong and you build confidence.  Worst case scenario some things go wrong and you learn.  And you learn with one deal's worth of money, so there'd be every reason to refactor your approach and keep investing.

Cash is your ammo.  Don't blow it all on one deal.

There are about 500 KW agents in that area, any of which should be willing to pay a 25% referral fee.

Let's review the equation for cash on cash return:  Annual pre-tax cash flow / Total cash invested

So you'll have to evaluate each scenario and see what they do to the ratio.  Higher down payment increases cash flow due to less mortgage, but also increases total cash invested.  Obverse with the lower down payment.  

Great story!  Two types of good deals, those that cash flow, and those that knowledge flow.

And I would never again work with a mortgage broker who baits you with 95% LTV and switches you to 85% after you're in contract. That information should always come early and often from a broker.

First see if the sellers are okay with reworking financing.  If they're not that's a variable that closes in on a fix value.

Then make sure the condition of the property meets FHA requirements. If the listing agent gets extremely nervous at the mention of FHA that may be an indicator there are known things that screen out FHA (FHA will back out on such b.s. as chipped paint).

If FHA ends up not being doable rework your vetting calculation for cash on cash return using the conventional numbers. Compare that ROI with what you can get with other deals, and consider losing your earnest money if you just plain back out. Or if you're lucky there'll be a financing contingency in your offer that will let you back out without losing it.

The moratorium will shield him, but there are property manager information networks where you can lay it all out to make it more difficult for him to rent again.

@Connor Kerr Section 8 can be a concern, but if she's been steady paying rent that certainly mitigates the concern.  If rent is at or above comp to me that'd be an argument to keep her there and just track rent with the market.