All Forum Posts by: Shane M

I may also want to add that if going rental rates in a neighborhood are high enough after calculating the max purchase price using the 50% rule, minus repairs, why the heck not? I would feel good buying a house for cheap, fixing it up (improving the neighborhood image) and renting it out with good cashflow (and selling eventually).

At what point do you become a slum lord though?

I've read some real estate books that talk about how you don't want to own the nicest house in a neighborhood. Obviously the comps in the area are going to bring its value down, right?

Does this mean you should avoid neighborhoods that may seem a little run down all together? What are some sure fire signs of neighborhoods you should avoid? (I've found one that has run-down homes next to well maintained ones, probably in a 50/50 ratio).

What role do parks and schools play in evaluating a neighborhood? I would think if it had either, that is a good sign...

What about religious organizations like churches nearby?

Thanks!

How long would you say it takes to really become familiar with an area. What size of an area should you start out with?

I'm looking at a fairly large neighborhood with at least 100 houses, I am trying to document the transactions, become familiar with the feel of the area, etc. It is within 10 minutes of where I live.

Does anyone have a rating system for the quality of a neighborhood, its potential or how far low it will go? I'm thinking obvious factors: employment, income levels, etc. But how big of an impact would something like an elementary school play? Can you be too close? Do they at least guarantee some level of residency?

Thanks!

I must have seriously miscalculated, looking back at my notes I don't see how I came up with that number. Although I have found one for 45K which will definitely need some work that could easily rent for 1000/mo once rehabbed. Of course I'll want to do the due diligence. And then after I'm sure of everything, make an even lower offer!

Exactly Harrison, thanks!

Thanks Mike,

59990 at 30YR 7% is 399/mo

462.5 - 399 = 63.5 (still too low)

49990 at 30YR 7% = 130.5 (decent)

Assuming all the other due diligence checks out that is, and if not than you want to take that off the price as well.

I'm beginning to see the light!

Mike: So your company will probably get approved so long as you give a personal guarantee?

Alright so I know this is a bad opp, but I want to make sure I know what it would take to make it a good opp.

$79,900 Short sale leased for 925/mo
Fails 2% rule right off the bat
Has been sitting for 2 months
50% rule takes it down to 462.50
Minus 428 mortgage (30YR @ 5%) = 34 (low cashflow)

So bringing the sale price down to 59900 would add about 100/mo in cashflow... plus save you 20K lol.

At that point would it be considered a good deal?

Great discussion, there have been two sales in the neighborhood for lower than the price the bank is listing 50 and 54K, (bank is listing at 57 currently). But there have also been sales for 90-100K in the same time period. I guess it couldn't hurt to make an offer for 30% down from 57 or even 50. The property has been on the market for 31 days.

Thanks! Now in the expenses category, do you include taxes and insurance? Or would you subtract that AFTER you take the 50%? I'm looking at a property that would have 400 of cashflow after 50% rule after subtracting the mortgage, but only 175 if you subtract taxes and insurance (again after the 50% has already been taken).