All Forum Posts by: Robert Raffalo

@Joe Splitrock - when you say $400 cashflow, and then speak of it being less work, then you are not including Property Management in the cash flow, correct?  So, if you are renting it for $1,300 and would pay a property manager $130/month... you are including that in your cashflow if you are saying that is less work than the rough neighborhood, correct?   Also, since maintenance (5% or $65 in above example) and vacancy (5% or $65 in above example) do not happen every month, then are you also considering that part of your $400 and $600 cash flow that you spoke of above?  Or, do you put the property management, vacancy, and maintenance dollars in your business account to save for a rainy day and the cashflow you speak of is above all that is deposited in your business account?

@Greg Gaudet - Thank you Greg, very helpful. In the far Chicago suburbs I can get close to 1% but the cash flow begins at anywhere from $80 to $170/ month. So, I appreciate your insight. I’m more firm on the 1% “rule” though than most of the people I read that who state they use it as a screening tool. In my opinion if you are not close to 1% then you are either paying too much or the oroperty is located in an area that does not command enough rent and will not cover your costs. And, I use the tool with an 80% mortgage leverage (20% down) in order to stretch my investment dollars further and get more properties into my portfolio for less out of pocket. Thanks again for your help!

@Joe Splitrock - thank you Joe...  so then, how do you determine what works for you?  Is it just simply if it cash flows at what “looks” like a good number?  $122/ month, or even $56/ month (whatever you are recklessly okay with in your heart). Example:  “It cashflows at -$22/month but it’s so cute and so close to my primary residence...  I just love it! Even though it costs me a little money each month”

At some point it has to be advised against because it is a bad business deal. Ratio Rules aside, when would you consider it a bad deal?  At what net cash flow per month would you stay away?  Thanks again for your guidance thus far...

@Dan Maciejewski -and, how do you calculate the cap rate of others in your area to know if you compare?

@Dan Maciejewski - thanks so much Dan!  One more quick question....  how do you calculate Cap rate?  Everyone talks about it but I’ve never seen anyone provide the formula...  would you please share that with me?

@Dan Maciejewski - there will not be much buy-side, built-in equity on this one though. We are buying close to market price. The market is hot in the ChicagoLand area for properties < 150,000. The place is sturdy, in great condition, and rent ready as is...  thoughts?

@Dan Maciejewski - so if I’m at .95 or .98 that wouldn’t scare you away?  It will cash flow if we get the rent that we think we can. 

@Jason D. - when you say, “doesn’t make money” do you mean negative cash flow?

@Jason D. - what about closing coats and any rehab expenses prior to renting the property for the first time?  And, would you ever so a deal if the math only comes out to .95 or.98?

Thanks Aaron... you said purchase price, then added rehab costs...  what about closing costs?  What if you end up at .95 or .98 and still cash flow?  What other factors should one consider in making a final purchase decision to derermine if it’s a good deal to have as a rental property? My steategy is to buy and hold, long-term.