All Forum Posts by: Scott Prock

@Ned Carey thank you for the clarification, it was all making better sense until you wrote ...

"So if you pay $800K for that building you have less risk and better returns than if you pay $1.2 million."

If the price drops, then the cap rate would increase and by your explanation would mean higher risk. At $800k the cap rate would go up to 12.5% using the NOI example of $100K

Greetings!

I just read an article by Forbes where the author - Brad Thomas - mentioned something regarding cap rates that has me confused.

Quote - 
"As a REIT analyst, I use cap rates on a daily basis for comparing the values of various buildings that are bought and sold. In general, a lower cap rate indicates there is less risk associated with the investment (due to increased demand) and a higher cap rates can be associated with higher risk alternatives."

I'm not familiar with what an REIT analyst is, but I thought the higher the cap rate the better?!? I mean using the example in the article of a property value of $1,000,000 and a NOI of $100,000 would be 10% I would think if the property's NOI was $200,000 that would be more desirable. Unless my understanding of NOI is incorrect.

Isn't the Net Operating Income the income generated after expenses are deducted, meaning the cash the owner gets after paying the operating costs. (not including the mortgage payment)

Am I misunderstanding something?

... Scott

@Lee G.

@Becky Farnsworth

I find nothing negative about your advice, in fact one of the reasons I haven't really dove into posting until now is I didn't want to sound like a typical newbie, or one who hasn't considered the cost of what I want to get into. Wanting to flip houses and my expectations to flip houses are far apart. I understand this isn't something I will be able to do tomorrow, or at least with any amount of success.

I have a five year plan, and my short term goal is to have purchased my first property before July 1st 2017. Your comments are the type I was hoping to get, and perhaps with in the next year or so I will have built or networked with a team that I can realize my goals. 

I'm happy starting slow, and the ideal first purchase would be to live in. We've been renting the same house for 5.5 years and ready for our own. I'm hoping to find a lease option, so any improvements I do to the property wont seem like a waste.

Thanks for the feedback ... Scott

@Libbie Grant I see what you you're saying, and it makes me think Boise should be a dream market. From what I understand it's a sellers market right now. It's not uncommon for homes to sell for more than list price, and they're not on the market for long. So, the key I would imagine is finding the deals.

So far all I have to go off of in my research is Zillow, Trulia etc. as I don't have access to the MLS (yet).

I could always "drive for dollars" on the weekends.

@Jonna Weber do the meetings go over? I ask because I'll be ending my day job in Nampa at 7pm. Would it be bad form to show up with only 30 min left?

@Ian Price thank you for that, I have read the BP book on low or no money down investing, but will look up J Scott's book as I have heard a lot about it. I recently finished "The Real Estate Rehab Investing Bible" by  Paul Esajian which goes over check lists on estimating costs, but the figures mentioned in the book are what worked for the author's market. Still, I think the spreadsheets will be usable.

@Cody Stone I saw the meeting, it runs till 8pm right? My courier route ends in Nampa at 7pm. I would only catch the last 30 min or so. Do the meetings run longer?

It's been three months since my first post and I have a better understanding on what I would like to focus on. 

I was leaning towards wholesaling at first, but I understand in order to do it right will require more up front money than I have at this stage. I like the idea of buy and hold for long term investing, but I've decided that will fit into my strategies later.

I have always liked the idea of house flipping, I like watching the shows on HGTV etc. but I understand that's not a true representation of the industry. My main reason for choosing flips is I LOVE the idea of taking something that is either run down, or outdated and giving it new life.

My struggle now is how and where to get started. The Boise, ID market seems to be a tough beginner market, but that's only on the surface after looking through Zillow, Craigslist etc. I'm sure there's a flipper market here, but I'll have to seek out those who are already doing it.

Which comes to my thoughts for my first direction. I need to find a mentor (famous words of every newbie right!?!?!) I understand I need to bring something to the table, and figure I have one of two options. Maybe I can do both. I could find deals as a bird dog and/or provide graphic/web design in exchange for being shown the ropes. I have a graphic design degree and will be happy to provide samples of my work to anyone who would be interested in working with me.

I have been wanting to run through the deal analysis parts in order to start developing that skill. My hurdle at this time is not knowing how to properly gage the costs of the rehab. I thought I could just start plugging in numbers from listings I find online as a way to practice, but I'm wondering if that would be a wise use of time, or will it throw me off since most of what I find online will be market listings that are priced too high.

Also, does anyone know if there are local Boise meetups on the weekends? My day job schedule prevents me from attending 99% of the meetings during the week.

Appreciate any feedback ... Scott

@Brandon L. and @Kimberly Gopp the tagging didn't work while posting from my phone LOL. 

Thank you to the rest of those who replied, the encouragement goes a long way.

... Scott

Thanks @Kimberly G. The last "shiny object" would have to be Amazon FBA sales with private label  products sourced from China. There are so, many projects I have started and not completed that at times I have questioned my ability to escape the 9-5 grind. I've always had an interest in real estate, have some knowledge from years ago and know it's the one vehicle that can create legacy wealth.

It's refreshing to see so many people who have made it work and are willing to help others. 

Thanks for the book mention, I've heard it mentioned a lot. I'll look for it on Audible.

@Brandon L. - "Hot market" Boise has been defined as a sellers market currently. The information I hear is that demand for homes far surpasses what's on the market. Sellers are often getting multiple offers with the final price being higher than the asking price.