All Forum Posts by: Rich C.

Joel, I don't have any more questions at the moment, but thanks a lot.

William - It is not in area where you can't be at night. But, it is in a transitioning area with increasing rents and renovations.

William and Joel, thank you very much for the advice. I greatly appreciate the insight and will be looking further into your suggestions.

Joel,

Thank you very much for the response, I greatly appreciate it.

I offered cash to get the deal, otherwise it would not have happened. I'd prefer to put under contract and finance with a conventional mortgage before closing, rather than refinancing post closing.

I am not too familiar with triple net properties. However, since this property attracts more of the graduate/young professional tenant, I don't think it would be a strong option (hopefully I'm not way off base with this thinking).

And, I agree with you about the speculation. Unfortunately it makes it difficult to compete in that type of market when I'm looking for healthy cash flow as well.

I'm not planning to put every cent into this and we have other income coming in. Thus, tax write offs are important as well. But, I have been putting more weight into cash flow ratios because I feel it's the best way to determine the strength of the deal.

You suggested you would take a different approach with that money. If you don't mind, can you please elaborate?

I'm looking into my first investment property in downtown Charleston, SC. After searching and analyzing for 8 months, this is the closest that I have come to a property that makes sense.

-Short sale duplex which caters to grad students and young professionals
-Building constructed in 1930 and in good condition
-Majority of properties here built 1860-1950
-Cap rates for the downtown area generally 6-7.5%
-Market is hot and multiple cash offers are abundant within first few days

Contract list: 340k, sold in 2006 for 444k
Contract price: 318K cash, which is probably 97% of FMV
Current rental income: 3,000/mth
Vacancy: 5% estimate based on other investors
Taxes: 5,000/yr
Insurance: 2,600/yr
Utilities and trash: paid by tenant
Maintenance: 5,040/yr (assuming 14% gross rent)
Contingency: $500/yr
Property management: plan to do own right now, yet market is 9-10% of rent
Mortgage: Plan to finance after purchase, 25% down at 3.70% 30 yr fixed

This seems to yield a ~6.5% cap rate and ~9.4% CoC return. If I hire a property manager, which is not the plan until several years in the future, returns are not great at ~5.5% cap and ~5.5%.

Questions:
1) Would you still figure a property management fee into the numbers even if managing yourself?
2) What are your thoughts on my analysis?