All Forum Posts by: Tim VandenToorn

@Andy W.  Ideally houses that attract students become available from June to August just as you mentioned.  We have a few properties right now ideal for students that we are unable to rent because of the time of year.  I have heard of investors offering a reduced rate 15 month lease (half normal pricing for 3 months) just to get the house occupied through the winter and spring, then jumping the rent up to market rent during the last 12 months.  In general we only hold properties for 30 days once a deposit is placed. 

Good Luck!

@Andy W.  Great work.  I love single family homes and duplexes.  East Hills is a great area to have an income property. If you h ave any questions about leasing, tenants rights, or even screening let me know if I can help. 

@Benjamin McClellan For my investors on this example (wood siding and carpet) I would raise the maintenance expense to 15% instead of 10% to cover the cost of on going maintenance that these material will require. On single family properties our tenants are responsible for water so I didn't include that expense either. I am also curious what you define as "CAP X" Is that vacancy? We use 10% although many investors would use something lower than that.

My CAP was 9.11% (again without water)

Tim

@Jeremy Scherer I haven't heard a lot about American Realty but their website certainly looks great.  The Google reviews not so much. Yikes!  

@Jeremy Scherer congratulations!!  Where in Grand Rapids, and what PM company did you select?  

It sounds like you are off to a great start.  Follow the address of your PM and be patient.  It's great you took the step and made a purchase.

 I would love to hear you expound on that.  It appears you are suggesting investors purchased based on appraised value for buy and hold real estate.  Is this accurate?

@Benjamin McClellan  

Just for comparison, I would be curious to hear what your CAP rate on this single family 3 bed 1.5 bath home would be on the NE side of Grand Rapids. For conversation lets assume this house has wood siding, replacement windows, a newer furnace, mostly carpet, but some hardwood.

Rent 850.00 

Cost 50,000.00 

Annual Taxes 1,100.00 

You insert the rest of the numbers as you see fit. I will also give you my CAP. I bet 5 different people with have 5 different CAP rates.

@Timothy Gerdes  I tend to disagree with @Cory Mccarthy on this one. 20% is certainly not the norm in Grand Rapids,  and if you are getting 20% on your purchases then we definitely could do a lot of business together.

If a property is rented for 800.00 with annual taxes of 1,100.00 vacancy of 7%, no management fees, annual repair on maintenance of 10%, and $540.00 for taxes, you can spend 54,780.00 on a property and get a 10% CAP.

In order to get a 20% CAP using the same numbers you would have bought this property for 27,000.00.

These opportunities are simply not available in 2015. However if they are I have buyers looking at properties in the 9% CAP range. That means the property you bought fro $27,000 can be sold for $61,000 using all the same numbers, and of course no management fees. (numbers are rounded)

Be sure to evaluate every aspect of the property.  If the property has carpet, wood siding old windows etc., raise your annual repair and maintenance expense.  I use 10% for any property that I completed a full remodel on.  If the property has not been remodeled or has a current tenant in when I purchase it, I raise this percentage, to plan for a expenses when there is a turn over knowing I will want to give it a face lift at the minimum. 

I also think wither your using property management or not you should always add this expense into your equation.  Even though you don't use property management today if you continue to purchase and your portfolio grows someday you will be using a PM.  If you are buying houses and not using a number for PM someday when you do use a PM your numbers are going to drop.  You might as well add expense on the front end.

Contact me if you want to sit down.  I would love to evaluate your numbers. 

The cap rates we are getting with a property under management are between 8% and 10%.  

@Joe Beach Welcome to BP. I am also very risk adverse and like to spend cash on my purchases. This has slowed me down, and has caused me to miss out of some great opportunities. Having said that, the longer I am in the business the more "risk" ( I use that word loosely as I wouldn't consider what I am doing very risky based on the conservative numbers I use) I am willing to take. The best piece of advise I can give is to: Know your numbers and set realistic expectations. A great article to help understand CAP rate can be found here: http://www.biggerpockets.com/renewsblog/2015/09/18/guide-calculate-understand-use-cap-rate/  This is the key to understand and to be successful.

There are so many opportunities in Real Estate I would encourage you to get involved.  I would also advise you to hook up with a local property manager who can help you understand all the numbers, rentability, functionality, and the process with the City of Grand Rapids which can be daunting.