All Forum Posts by: Warren Foster

Mike,

Looks like you're off to a good start here. As alluded to above, 10% for maintenance is probably low. It might be OK for a newer home in a better neighborhood, but in my experience, maintenance tends to be much higher in lower income properties. I personally use 20% for the type of houses you describe above.

In addition, while maintenance costs usually cover routine items, you should probably consider accounting for capital expenditures as well i.e. Roof, A/C, Furnace, etc. I usually allocate another 10% for this and even then, i can just see Murphy rubbing his hands in anticipation.

But, even with all this, it sounds like the properties will turn out to be an excellent investment for you. Good luck!

Warren

Michael,

Sounds like you're off to a good start. I can sympathize with the others who warn of the trials of dealing with low-end rentals (like the angry boyfriend that burned down one of my best properties!) But, if the numbers work out and you can find the right PM with experience, it can be a great way to get started...

Warren

Mike,

Just remember, it's all relative. One of my SFH's in NW COS that survived last years fire got hammered in the big rainstorm this september. 25k flood damage in the basement. Now if it had burned down, insurance would have covered it, but flood damage...out of pocket. I'd take the 4k repair in a heartbeat :) Good luck with it.

Warren

First of all, A big thanks to all of you that sent me great properties! From these I managed to buy and rehab 10 properties over the last 6 months, all from overseas. I'll knock out a quick lessons learned in a separate post. Anyway, I am still hoping to pick up a few more over the next few months.

I have found that my sweet spot for ROI on these low income properties is 15-20k all in after rehab with rents between $400-$600. I need an ROI of at least 20% AFTER the 50% expenses guideline. If you run across anything that meets these criteria, send em my way.

Thanks,

Warren

Sometimes it helps to live close to the source. It is $1.60 a gallon here in Abu Dhabi! Of course it was .16 a gallon in Iraq the last time I was there :)

Josh,

Sorry for the delay,

I have found my sweet spot investing in 60 month D, E, and F loans, 20k and under. These tend to have the highest return/default ratio and from experience, most of my defaults initially were from those that "maxed" out their loans, thus the 20k maximum. My NET annualized return as of today is 10.27% so I am not complaining.

If you have any questions, I would be happy to answer, at least based on my experience with them over the last year and a half.

Warren

I can't speak for Prosper, but I have been very satisfied with LC. Been investing a little over a year with 3,000+ loans current and averaging 10-11% returns. I have the found that my default rate is almost identical to the historical rates. I do invest in a fairly narrow range of loan types which has greatly decreased my defaults compared to when I let the site "pick" my loans for me (before i knew better.)

Thanks to everyone for their replies and offers. I currently have 3 properties under contract from offers on this thread! Keep them coming...

Did you have a deployment or PCS clause in the lease? Often military members will use this to get out of a lease and can make it harder to get reimbursement for your costs. Most of the time the clause is used legitimately and should be honored as such, but there are always those few who try to scam the system...

Guys,

Thank you all for your responses. Obviously I need to to study up on these a bit more before considering to add them to my RE portfolio. Again, thanks for taking the time to answer.

Warren