All Forum Posts by: Tim Herman

@Becca Pariser Is the only goal getting to infinite returns. You can manipulate numbers to get to infinite returns but better numbers give the true picture of the property. Buy cheaper, increase rent have a higher arv, spend less on rehab. All those will go towards your goal. Did you run budgets on repairs and capex or only use percentages. An example of 1 item in a capex budget. Floors. Go to your favorite flooring store and ask what the commercial warranty is? 10 years or less. That is your lifespan. Say you have 1500 sf of flooring. My area it is $6 sf. $9000/120 months lifespan=$75 per month for 1 item in a capex budget. Still need to account for roof, hvac, appliances, hot water heater, bath and kitchen remodel, etc. Is your capex budget sufficient? Time also plays a factor. In the example above say the floors are 5 years old, now you only have 5 years to have enough budget to do the floors. Your capex for that one item is now $150 per month. What I do now is save every penny until I have enough saved for 1 1/2 times my most expensive capex. Then I start saving for the next investment. Once you use your reserve for anything you suspend your saving for the investment and grow it back up to fully funded reserve. Once you get critical mass you can use cash flow from other properties.

@Becca Pariser I use 8% vacancy when analyzing long term. MTR rentals are going to be determined by contract length of your applicants. How long will it take you to rerent to another MTR tenant. Is it going to take a month between tenants every time a contract expires. How did you determine the rental price. I looked at some rentals in the area that were bigger and rented for less. Weren't furnished but 2 beds and $500 cheaper. You are getting a 300% return on a 50k rehab. If your numbers are accurate this would make a better flip.

@Antonio M Johnson Jr Who is the lender that is giving investment loans for 5.5%. I just googled and it is 7.0%.  Who is managing the property for 4% more likely 10-12%. Are the utilities separated. Are their any common areas that the landlord pays. How much is grounds maintenance? Did you get an insurance quote? Can't tell how many units there are.

@Becca Pariser How did you arrive at 5% vacancy. That is the same as each tenant staying 20 months between turnovers. Do the contracts with the hospitals go 20 months. Your property tax will go up. If 275k is $700 per month and the arv is 486k there will be quite a jump in taxes. Where did you find a contractor that can do a project for 50k and get an additional 150k in equity. Did you run budgets for the repairs and capex. Hard to give advice without knowing more about the property. Is the $50 misc for grounds maintenance. That seems light.

@Aaron Kelly I looked up median rent and it showed 1 bed as $1450 and 2 bed at $1780.  Total gross rents would be $6460 at median rates. Your due diligence would be to get the most accurate numbers.  Are all the utilities separated. Who does the landscaping? Can you get insurance for $60 per unit in Texas?

@Evan Rumble as a pro member you can get a lease written by investors, vetted by attorneys for your state. This is under the tools section of BP. One created by you may be in conflict with the landlord tenant laws in your state. 

@Grace Quandahor lots of mistakes. 31 million dollar of loan fees. Can't refi before 6 months. Won't get a loan without insurance. Cash out refi will be 75% of arv or 450k. On the refi unlikely to only have $10 fees. Interest rate will be 7% so around 3k payment. Need to budget for capex and repairs. No PM costs.

@Rajiv R. No, you are leaving $32900 out of the 65k you deployed in the property. Not including the additional cost to hold the property for an additional 4 months.

@Rajiv R. Loan of 230k. cash needed DP of 40k plus your closing and holding costs=$65400.Total all in is $295400 less refi of $262500=$32900 loss. Plus you will not be able to refi with a conventional loan for 6 months, so your holding costs will be more.

@Reid Smith Capex and repair budgets are an estimate of the cost. Percentages are used to quickly analyze a property. You need to do budgets to get a more accurate number. You have to decide how often you are going to refresh your str. Yearly, 3 years, 5 years, etc. Each will have a different repair budget. I found paint can be touched up for about 5 years. Using made up numbers, assume it costs you 2k to repaint the str. Then you have to estimate the number of service calls and their costs. So assume 1 per year at $150. For yearly rehab $2150/12= $179 per month. Assume you can touch up for $500 per year. For the 5 year rehab budget. $2500+$2000 for touchup+$750 for repairs=$5250/60 months= $87.50 per month. Different numbers for the same budget. You do the same with a capex budget. Each component of a house has a lifespan. My favorite example for capex is floors. Go to your favorite flooring store and ask for the commercial warranty. Most will be 10 years or less. Assume 2000 sf of flooring. My area it is $6 sf to replace. $12000/120 months lifespan=$100 per month for 1 item in a capex budget.