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All Forum Posts by: Tom Blankenship

Tom Blankenship has started 1 posts and replied 6 times.

Hi Sharee, I just came across your post and see that it is 10 months old.  Did you ever figure out the best option for you for a business address?  I am in the same boat.  I would use something like the UPS store, but unfortunately, the nearest location is 45 minutes away.  I am not going to drive there 2-3 times a week to get my mail.  I did recently purchase a PO Box and confirmed that I could use the street address option with my local post office.  I purchased the PO box about 3 weeks ago and I am now getting ready to change my business address on various utilities and other documents.  I decided to confirm with the post office again that I could use the street address with the PO box.  They confirmed that I could, BUT that I could not link my business address as the Post Office's address.  How frustrating.  I am not sure what to do now for my business address.  I am not going to use my personal residence and the Post Office said that I could not use their street address as my business address.  I have researched the virtual mailbox option, but not quite sold on having somebody else opening my mail and send a scanned copy of the mail to me (for an additional fee).  I am just curious what you came up with.

@Jaysen Medhurst, thank you for the input. I appreciate you taking the time to look at these numbers. I agree that the BRRRR strategy would be the way to go. That way we could pull some of the equity to pay off that HELOC and increase the cashflow.

Hi @Jaysen Medhurst, thanks for the reply.  The average Cap Rate for the properties that we are pursuing run about 13%.  That looks great on paper.  Below are the numbers.

The local bank that I work with will loan 85% of the property value or 85% of the purchase price, which ever is lower. I believe the ARV of this property will be about $82K. So to purchase this I will need 15% down of the $50K purchase price ($7500). I also have estimated about $13,500 in rehab. The rehab and down payment will come from a HELOC that will result in a monthly payment of $210. The mortgage of $42,500 will be at 4.99% for 20 yrs. This will give me a mortgage payment of $280.25. So in looking at the monthly numbers above, we have $550.22 of net income minus the $280.25 mortgage and the $210 payment for the HELOC. This yields $59.97 of income after all expenses. One last budgeted expense that I did not include yet is Cap Ex. If I use a Cap Ex rate of 10%, that will be $100 budgeted for capital expenditures, which will turn my net income of $59.97 into a $40.03 loss each month.

This is my dilemma. I realize that Cap Ex is money in the bank, until you have spend it, as well as some of the repair costs that I show above. Those are projected costs. The 10% property management fee ($100/mth) will also be used to pay myself at least for the first couple of properties. If I had cash for the down payment and rehab costs and didn't need to utilize the HELOC for this purchase, I would save $210 / month and the cash flow would look much better.

I have thought about excluding the costs of the HELOC from the calculations of the initial analysis. My thought is that the HELOC will be paid off with 3-5 years and will not have a long-term impact like the mortgage.

I have also thought about BRRRRing the property. I could purchase, rehab, rent and then refi based on the value of property. This would allow me to pay off the HELOC as well as hopefully pull some additional equity to use for the next property purchase.

Again, I am new to REI and I need some advice on how to determine if a property is worth purchasing when the HELOC payment is deflating the cash flow.

Thanks for the help!!

I would say I have a quick question, but it is not so quick. My wife and I are looking at purchasing our first deal other than the investment properties that we own through our IRAs. We are focusing on local multifamily properties for now. When I run the numbers following Brandon Turner's process, I end up with very little cash flow. My problem with this is due to using a HELOC as my down payment and rehab money. If I had the cash to use for this, I would be able to clear Brandon's numbers of $100/unit and approx. 12% CoC. By using the HELOC that adds another $120-$200 per month in expenses to pay and all the deals that I am analyzing at this point are not providing much cash flow. If I look at finding fixer uppers, my HELOC payment is higher with the higher repair costs. If I look at nicer properties, then my HELOC is lower, but my mortgage is higher. So in analyzing deals where I am coming in with no money out of pocket and everything is financed using the combination of a HELOC and traditional mortgage, what is the best process to analyze the expenses (fyi, I am using the BiggerPockets calculators and accounting for all the expenses listed there). Thanks for the help!

Great post Collin! It's funny that the steps that you took are the same steps that I have been taking for the past several months and pretty much in the same order. In fact I have read many of the same real estate books that you have listed in step 1. I would say that I am on your steps 4 and 5 at this point. My wife and I have met with a couple of local banks and should soon have access to a HELOC against our primary residence so that we have quick cash for great deals. I'm torn between single family and multifamily properties for investments. In our area it appears to be easier to find rundown single family properties than it is multifamily. My primary focus is on passive income and it is going to take a large number of single family properties to generate enough passive cash flow to drop the W2 JOB. I, too, have been using Zillow, Trulia and Realtor.com to study the current rental rates in my market and to search for multifamily properties. I have educated my wife on as much as I know about the BRRRR strategy, and she is all for it. I think it is going to be harder to pull equity from the multifamily properties when they are priced higher (at retail) because they are investment properties. We have come across a triplex that we are scheduled to go see next Monday. Sounds like the owners are ready to get out of the business, so we are hoping to be able to help them out : ) Again, enjoyed your post! Thanks for sharing all the details.

Great job!  The reno looks awsome.