All Forum Posts by: Scott Titus

 Yes I have been looking at some nice pergo laminate. About a $1.50 a sqft. The carpet was appealing because Lowes Will install it for $97 plus materials. 

You bring up a good point. To clarify, when you analyze a potential rental, you include the following:

Vacancy 4%, Cap Ex 10%, Turnover 6%, Maintenance 5%, property mngt 10% + PITI = Total Expenses.

To further that, should I include legal/eviction fees of x %? 

Everyone here nailed it. Qualifying the rental is the most important step. Always remember, they need to move into your property more than you need them. Another red flag is reachability.. Is it hard to get ahold of them? Chances are this will be the same during your collection calls. I find it hard to be objective if I have become to personal BEFORE the checks. I catch myself going against better judgement or trying to play hero. "Your interested in the property, great. Fill out the application, I'll email you the link to complete the verification process. If we are a good match, I will call you immediately with more information if we are not a good match I will email you the reasons so you can come up with a plan before shelling out more app fees to others. The key is to lay out all expectations upfront. 

@Ken P. very good point on the Cap ex. My initial equity after a 15K rehab would be 35K. I am more concerned with building capital initially on the first few investments. I'm open though with exit strategies below...

On capex: Driveway is good, roof may go in 3 years..roughly 12 square @220 a square tear off and new replacement ($3K), Maybe add that to rehab cost? Less COC but more cashflow….

Strategy 1:

3 Year Hold. Cash flow 7-10K in that period and sell it for Market value (38K equity)

Strategy 2: Lease option for 3 Years, get an option deposit, a little more in rent (10%) 10-12K cashflow (less maintenane/vacancy) and Still sell at market value.

Strategy 3: long term properus cash flowing vehicle for wealth. 

P.S-  Still a newbie, feel free to rip apart my logic.... : ) 

 I have experience in Property Mngt myself and will definitely NOT pay a property mngt company; however, In the event I wholesale the deal on a double closing, I want to assume the investor/Landlord has 20 properties and will need this expense included. 

Brent, I will continue my education on this subject, in regards to carpets/paint, I am banking on (somewhat) worst* case scenario and yearly turnover. 

Also a side note- I have a home warranty on my main residence. The company offers the same package on rental properties. $49 a month with a $60 service fee per occurance. 

If Furnace and AC take a dive, I pay $60 to replace both. 

I have the reserves to cover them out of pocket, but assumed this is my Capital Expense line on the P&L.

Further Analyzing rental property. Purchase price $50-60k. Low income area, not a warzone. Not counting on appreciation. Rehab 15K. 

Here's my #'s

Home rents for $900 per month (5-10% below MR). Vac 10% ($90), maintenance 5%($45), capex 5% ($45), property tax $140, insurance $91, property mngt 10% ($90). $501 + Mortgage $235 (20% down on 60k loan) = Total expenses $736

Monthly Cash flow $164 ($1968 yr)

Cash to close (3% closing + rehab + downpayment) $28,800

Coc 6.8% ( 11% if rented @ market rent)

Equity- $38K

Couple questions I hope to clear up:

Assuming rehab and ARV are spot on....

1. Are my numbers too conservative, making me pass on rentals that can really pay off

2. If I assume a high vacancy, can I also assume at least 5 out of 11 months incurs a 5% late fee each yr? ( $225 yr) 

3. Can I calculate pet deposit $200 or $25 month pet service in analysis. Or just a bonus assuming I will have to change the carpets yearly anyway..

Thanks.

@Jim Brown @Adrien C.. As i somewhat expected, seller owes 72k on the mortgage. I obviously couldn't offer anywhere near that. She is submitting to a her bank for a short sale. Her realtor is getting 3 bids for the bank. This is my first deal, I understand the general premise of a short sale. Any tips or advise I should know or expect during this process? Will they only discount the mortgage the cost of repairs?

Thank you for the info. 

I put in an offer for a property. It cash flows for $250 a month, 12% cash on cash, Equity $30k. (BP rental calc analysis). Purchase Contract is not assignable without sellers permission. Thinking I am going to use transactional funding. Property is 55K, is there a minimum 2% or $2000. I sure it varies by lender, 1st potential deal want to have my numbers correct.

I agree. Definitely been engulfed in the education process of REI for the past year. I like to have more tools in my toolbelt (exit strategies). This is a business, I can not build a good reputation by backing out on deals via escape clauses. ( I see them as a second round of negotiation).