All Forum Posts by: Tandi H.

@Rashad Jones Jennings 

I agree with @ Al Pat that a target cap rate of 12-15% (after taking into account all the costs, and also any utilities as @Nate Kaminski mentioned) is a good place to start.  

Think of it this way: you can make 7-8% invested in a good selection of Vanguard mutual funds without lifting a finger. REI should outperform other investment choices, or else why would you do it? Unless you really like being a landlord?

To be fair, there are the other ways the REI benefits financially, in addition to cash flow: property appreciation, tax deductions, loan pay down, and some would add control over your investment and the ability to force appreciation.

However you want to aim for a cap rate in the teens up to 20%, especially if this is your first investment and you want to build a portfolio off the cash flow.

@Mark S.  

That's cool you know Keith!  So were you checking out the cacao farms?  What did you think?  I downloaded the info packets and they've been sending me videos, etc...I'm definitely curious about this type of investment.  My main concern would be lack of control and distance.  While of course any out of state turnkey includes a loss of control to some degree, for stateside properties at least I know we could fly there and do repairs, etc, if needed.  I do like the idea of supporting local Mayan farmers though, as I've traveled in that region and the Yucatan is probably my favorite part of Mexico.   I'd love to hear your take! 

I listened to the financially free podcast and it's one of my favorites.  I would love to meet Keith and pick his brain.  His last podcast (Monday's?) was great too.  That got me inspired to replace all our income and free up our time.  I loved his point, time is not money!  Time is worth so much more than money.  Money is replaceable, Time is not.

I see your point about returns on private lending vs turnkeys.  Perhaps as you are saying, to get the cash flow per door that I want requires investment of some sweat equity.  Forced appreciation is what is allowing our local real estate to cash flow well.  Good food for thought...

@Mark S.

Thanks for the numbers breakdown - turnkeys look less palatable when you account for the lease renewal and placement fees.  MSHB did tell me their average stay per tenant was about 3 years in the same property, perhaps that reduces the leasing fees a bit.

However 100-200/mo cash flow is not acceptable for me.  I feel that 300/mo is a minimum per door.   Otherwise the number of properties required is too high.

I just called @Brian Adams today about his syndication, and he requires "accredited" individuals as defined by the govn't, which means over 200k annual income or net worth over 1 million.  That's to reduce his paperwork and liability for securities.

He said beginner syndicators will often take non-accredited investors but of course then you are working with a relatively untested system.  So for me that means syndication is probably not a good bet at this point.  Perhaps being a hard money lender to local flippers/investors would be something I would do, and go for a 10% annual return.

I don't know what you plan to do with your debt, but I plan to leverage as much as possible a la Keith Weinhold/Get Rich Education.  I like his approach and if you haven't heard him yet, he has some great podcasts.   So I don't plan to pay off mortgages, rather to pull out equity and reinvest.  

@Sean Gallagher Hi Sean, which area are you mentioning? Does the 400-500 cash flow per month include property management, taxes, insurance, R&M, and CapEx? What price range houses are these (under 100k, 100-200k,)?

@Mark S. @Domonick S.

I contacted Mid South Home Buyers last week and got on their list - they said they were about 6-8 months out. I did have a good conversation with them and feel that they are a solid company. Their cash flow estimates on the website seem reasonable, however they don't deduct R&M or CapEx in those numbers, so reduce them a bit further.

The concern I have with turnkey SFR is that unless you are buying all cash, you are getting a mortgage and the limit is 10 for standard conventional. At $300/door, 10 gets you cash flow of $3000/mo. If you are trying to create more than that, it seems like you'd need MF properties to stay within the 10 limit. Mid South said they occasionally have duplexes, but that those go to cash buyers first for the most part.

I'm interested to hear how much cash flow other turnkey buyers are looking for per month?  My goal is $5000-6000 total, including rental properties I manage in my home town.

$751 mo cash flow x 12 mo = 9012/yr

Assuming 25% down on 425k is 106250 up front investment.

9012/106250 = 8.48% ROI

Not great, but okay. However your cash flow is wrong. You haven't accounted for vacancy, repairs and maintanance, CapEx, nothing. That seems like an over optimistic move. Taking off 5% for vacancy and 5% for R&M and CapEx, (750-315), you are at 435 mo cash flow x 12 = 5220/106250 = 4.91%

So more realistically, you are ranging from 5% to maybe 8% ROI (that would be a year where nothing needs a repair, no one moves out, nothing needs maintenance, in other words, not gonna happen.)

Unless you are banking on extreme appreciation it doesn't look good.

@Caleb Heimsoth -  thanks seconding @Alex Craig, I will check him out!

@Tim Farrell, @Gordon Cuffe, @Jason Carter

Thanks for all the feedback.  It sounds like the Midwest is the place for the best deals.  I was hoping for a SW city but perhaps that's not to be.  

Thanks, we have a couple rentals in our hometown of Albuquerque, however prices vs rents are high here.  Not an ideal market, and not a lot of growth.

I'd prefer to be a short flight or not to long drive away from the properties we purchase.  Kansas City isn't too far.  But that's why I was wondering about Utah, Arizona, and Nevada, which I haven't heard mentioned at all for turnkeys yet. 

Has anyone looked into Reno?  Anyone know of good providers they would recommend there?

Hi @Marc Winter, thanks for that input.  We did go with sliders for this 10' wide closet.  I guess we'll find out how that works.  We used three guides spaced along the floor, and doors hang from tracks above.  They are also from HD, and have frosted glass panels.  I'll attach a pic of them, I think they turned out nice.  Hope they hold up.  I imagine the guides on the floor will get stepped on, broken, over time, but those can be replaced.