All Forum Posts by: Seth Mosley

Market value is what people are selling or buying similar properties at.  This assumes that the property is properly marketed.  This is the value based on comps.  An appraisal is the value that a licensed appraiser gives the property assuming a sell within 6 months.  My experience is that appraisals can be somewhat high.  This works well for properties that are move in ready.  Under the above circumstances you usually can sell property within 5% up or down of its value.

Properties that need rehab are different. Not only do you have to assess the ARV but the cost of rehab. Not as many people are willing to buy properties needing rehab. The property will not sell for ARV - Rehab cost. People want a discount to that number to account for time and effort and risk. Each rehabber has his own profit margin.

I don't worry about buying below market.  I want to make my profit margin.

I hope this helps.  Its only my opinion.

Bill

I look for 15% COC on a conservatively leveraged property (65% LTV). I also want the property to be in a "good" area (no worse than what would be considered C+ area).

I don't care much about cash flow, as that will take care of itself if I hit my COC targets.

3 rules:

1 - All my cash in back within the first year

2 - $300/month cash flow

3 - After I get all my cash back I put in (refi), I have to have enough cash back to go onto my next deal.

I agree with Joe. We are constantly paying down debt and don't worry so much about what ifs. We never have. In fact if I had worried and calculated and fretted as much as some do about what could go wrong, I probably would still be an accountant, sitting at my desk all day. 

Actually most houses stay rented so we don't actually worry about vacancies. We also focus on properties that rent for close to 2% rent/cost and then cashflow any repairs.

The secret is to have a bunch of properties and have enough cash flow to pay for repairs. 

Cheap house rentals are the best!