All Forum Posts by: Ross Hayes

Thank you for all of the responses.

To clarify - if a tenant does not have renter's insurance with liability, if their pet hurt someone, the landlord could be held responsible?

Hello

We are in the process of trying to lease out our second SFH rental property. We have previously had a firm no pet policy. However, we are seeing a lot of interested individuals asking about allowing pets. Our main hesitation is simply that we feel that pets will cause additional damage, odors, etc..

If we were to consider this, what are you currently charging for fees, either one-time or additional monthly fee(s)?

Also, do you give any different considerations for cats versus dogs?

Thanks!

 Thank you. When you say equity capture, are you referring to purchasing at a discount? In other words, purchase price below market value, creating equity on day one?

For SFH LTR, I'm curious for your current take on the following deal analysis metrics:

- What are you considering an acceptable cash on cash return currently?

- At what point for return on equity, do you feel like you are not leveraging the equity well enough?

- What kind of cap rate do you target for a SFH LTR?

Hello

We've had great success on our two SFH long term rental properties, and one of the parts that I really enjoy in this endeavor has been the deal analysis. I've enjoyed creating and tweaking our own analysis tool to help us analyze deals.

I don't think we are interested in pursuing flips, but I'm curious to better understand the analysis side of this strategy to continue my learning.

I've tried to do some research, but I keep coming up with some areas that I'm not following.  Can you help?

I understand that the most basic formula is ARV - purchase price - rehab = profit. I'm comfortable with all of those, but I know that there is so much more than goes into your return than just those three main levers.

Specifically, I'm getting hung up on 1) financing, 2) closing costs on both ends, and 3) holding costs.

            - For any part of the project that you finance, whether it be purchase, the rebab, or both, do you simply look at the monthly loan payment for that leverage and multiply that monthly debt service payment by the number of months you expect to hold the property?

           -  If so, then that total (for example...monthly debt service is $2,000 and you underwrite at holding for 6 months, then you factor in that you have a total of $12,000 cash that you will be putting into the deal over that 6 month holding period) counts towards your "costs" or "cash into the deal" that you need to factor in, correct?

           - Is there a general estimate proxy that you use for factoring in closing costs for the purchase and sale of the property?

           - Is there a general estimate proxy that you se for factoring in any closing costs with the lender for the financing, assuming it is not an all cash project?

Coming from the buy and hold side of investing, I'm very focused on cash flow, cash on cash, and then looking at the other ways that I value a deal (appreciation, principal paydown, etc.). But as I think about a fix and flip, beyond just swagging an ARV minus your purchase price and minus the rehab budget, I know that there is so much more to the equation to understand a true return, especially as it relates to putting your own cash into the deal.

Thanks in advance!

Good to clarify that it is a 7 year ARM, amortized over 30 years. That makes a huge difference. Is there a floor and ceiling on how much the interest rate could change after the initial 7 year term?

 This is a great question and one that I've tried to get more context, as well.  I understand the guidance that most will give that any estimates will vary and you need to talk to multiple GCs and get multiple estimates.  I appreciate that, but I also want to be able to do a very quick swag when doing some deal analysis to even decide if it may be worth further exploring.

See this following discussion that I thought was somewhat helpful:

https://www.biggerpockets.com/forums/24/topics/1174379-rehab...

Your description sounds similar to what this thread describes as "Light Rehab"?  If so, maybe $45/sq foot at 900 sq foot is $40K?  But, to me, that seems high but fully realize there are so many variables.

Another data point - we are doing some very light work on a SFH property that we just purchased and getting ready to rent out. Nothing fancy by any means. We are doing some new vinyl plank flooring (not through the entire house), paint on the main floor, minor electrical work, replacing a door, new ceiling fan, minor plumbing, etc.. Most of the work is being done more at the handy man level of experience. At this point, the work (labor + material) is likely tracking at $15 or less per sq ft. I'm in the Midwest, small town.

 Thanks for the feedback.  Why would it need to be done before any cleaning or painting?  Fresh paint is going up this week, so if I were to try this, it would be after painting and other work on the property.

Thank you for sharing.  Great work - makes sense.

I used a HELOC to help fund the purchase of our first SFH LTR, in conjunction with actual cash. I've just ran my own aggressive amortization schedule to help pay down with the rental income. And just recently, we did a cash out refinance on that first property to purchase a second SFH LTR in cash, with no cash out of our pocket on the purchase. It has worked well, and for the concerns around variable rates on a HELOC, we account for that risk/fluctuation in our deal analysis. We know have all equity on paper in the new property to continue to scale.