All Forum Posts by: Supada L.

Please understand Zillow estimates are not accurate just a vague number. Some times they are skewed either way. Look at the MLS comps . They are real facts.

@Supada L.

This is the program we have been using.

https://www.houseflippingspreadsheet.com/

@Supada L. I have never invested yet, but I am an RE agent and can’t press enough how important getting a home inspection is before purchasing a property. It will save you so much money and leaves you with the ultimate decision to walk away from a property that doesn’t make sense to you and your numbers. I hope things get better for you 🙏

I am not fully aware of roofstock's fee structure or what you had to pay a realtor/roofstock to purchase the 'turnkey' property, but in my opinion it seems like a math problem...

If you sell it, you are out what those fees were, what your realtor fees and your negative cash flow and you would gain back the appreciation on the house if someone is willing to pay it.

If you keep it, you first need to figure out a way to get the cash flow positive that some others have replied to on here. Raise rents, drop property management and manage yourself for a bit, etc. One quick action by you can take it positive, especially if you are okay with managing it yourself. If you get it positive, and you still want to sell it, your math equation becomes how many months do I need to own this to cover on the amount of fees/etc. that I paid to get the house. That gets you back to breaking even and you can do with the house what you would like.

Thanks,

Sam Domach

 >I've decided to hold it for another year and reevaluate the situation.

You have indicated the pro forma is too aggressive.  I showed, with cited references, that the historical rent and property appreciation is below the rate of inflation.  Another poster pointed out the city has a declining population.  I did not verify this information, but it seems likely seeing, in inflation adjusted dollars, the property value and rent has been declining.  

What do you expect to happen in the next year?  I suspect a best case, but unlikely because it has an aggressive pro forma, is that you get $1200 cash flow over the next 12 months.   The more likely scenario is that you continue to have negative cash flow. 

The negative cash flow would not bother me if there was good evidence that it would improve.  Without rent or property appreciation (meaning the appreciation is less than the rate of inflation) I see little chance of the situation improving. 

Some questions/thoughts:

1. What are you expecting to happen in the next 12 months?  What do you see occurring to make this a decent investment?
   2. Do you believe you cannot find a better investment?   The S&P 500 has a lifetime return over 9%.  It is passive.  I am not saying S&P should be the best investment you can find, but I do believe over the long term it will do better than your Meridian investment.  
2. 3. I realize there is selling costs. You never indicated how much you invested (your initial out of pocket purchase costs), but I expect it was at least 20% (I.e. no greater than 80% LTV). If you sell at a cost of 8% (commissions plus any other closing/miscellaneous costs), you will recover much of that initial investment.
   4. There are too many good investment opportunities available to keep such a poor investment.  Even if it produced $100/month cash flow, this would be a poor investment due to the poor cash flow combined with the poor appreciation outlook. 
   5. I see virtually no up side in keeping this investment.  Best case, it meets its projected cash flow and has a poor return.  Worse case, and the more likely case, it continues to have negative cash flow. 
   

Good luck

Can u seek any remedy from Roofstock on the repairs that were uncovered?

Most people dump a few hundred dollars a month into a savings account without thinking twice.  If you're losing a few hundred dollars a month I don't think that's a big deal.  Think of that property as a savings account.  Except that the mortgage balance is getting paid down ($), you get great tax write offs ($$), and if you bought a decent property then the rent will increase ($$$) and the value will go up over time ($$$$).  
If it was me, I'd keep it and move on to the next deal.  You can always reposition it later (refinance, re-rent etc....).  

I bought a deal that was a negative cash flow from day 1 because of my financing (13% interest rate), and I knew it was under valued but that the market hadn't caught up to it yet.  I purchased it for 90k and based on the current available comps the appraiser also said it was worth 90k.  But I knew it was worth at least 120k, but there were no comps to support it.  So I bought it anyways and lost about $300/m.  I have a great tenant pool in that area FYI (very important).  15 months later it appraised for 125k and I refinanced into a small positive cashflow but a huge equity position.
Not all negative cash flow deals are bad.

Did you do an inspection before you bought?

@Supada L. Was the repair made a surprise or something you knew coming in and thought it could be delayed? Also if you bought it last summer means you haven’t even owned it a year. Had I given up on my first rental property I would have sold it in 6 months too because

I was $3K in the hole because of a bad tenant situation. Now I own 3 properties (closing on 2

More in a month) and have $10K in extra cash flow and it’s adding up in a good way. If you can not afford or foresee crazy expenses that you should have known about in your due diligence by all means get out quickly.

However if you believe in your due diligence and think you can withstand this initial (and unfortunate) hit then I would hold my ground and let it play out a bit longer. All depends on where you’re at not all of us “experts” tell you here.

Happy to talk on the side to take a look at your numbers too.

Just my 2c.

If you are not satisfied with your purchase, contact Roofstock within 30 days of closing and they will start the refund process.