All Forum Posts by: Trevor Miller

I'm now 100% on board with REI. I just made my first offer on a local tri-plex with great cash flow potential.

I realize haters are going to hate but a friend just sent me a recent Forbes article regarding the impending doom on the real estate industry.

https://www.forbes.com/sites/jayadkisson/2020/10/29/the-serious-disconnect-between-a-hot-residential-real-estate-market-and-the-coming-tsunami-of-foreclosures/?sh=4192b11067eb

Personally, I see this as an opportunity to purchase more properties at a great savings.

My question is what happens to the rental market during a down turn? Is it easier to find renters when there is a surplus of foreclosure? Does demand increase?

It seems logical that demand would go up as people still need a place to live.

Thanks for reading,

Well someone beat me to the punch and the seller accepted an offer earlier this evening.  

Question, Do you think it's risky listing possible deals on BP asking for help?  I don't want to go down this rabbit hole, but in the back of my mind I wonder if people might see a possibility and capitalize on it.

Thanks for the reply Justin.

I'm going to see the property tomorrow and will investigate the true age of the HVAC units as well as all other major components. My plan is to make an offer based on what the house needs. In a perfect world, I'd like to get the property at $180k, put $25k into it and do a Cash out ReFi to move on to the next. If the seller won't play ball, I will then need to decide whether or not this is still a good investment. I'm starting to get a grip on Cash on Cash return but still can't find a clear answer on this. Below is an example I put together. I replaced the property management (10%) w/ CapEx (10%) and ran it with the worst-case scenario that the seller will not budge on the $199,000 asking price and I need to replace three furnaces, roof etc.

PURCHASE PRICE $199,000
CLOSING COST $2,985
CASH TO CLOSE $50,496
LOAN AMOUNT $151,489
REHAB $25,000 (Furnaces, Roof, Paint, Misc.)

MONTHLY RENT $3,090

EXPENSES:
MORTGAGE $836
INSURANCE $125
PROP TAX $453
CAP EX (10%) $309
VACANCY (10%) $309
REPAIRS (5%) $155
MAINTENANCE $50
TOTAL EXPENSE $2,237

CASH FLOW / mo $854

CASH ON CASH 13.57%

Is the Cash on Cash telling me I'm making 13% on my cash investment?  If so, I love this!  Also, if you like to average $200/door this math says I'm getting $285/door unless I'm doing something wrong.

I'm starting to better understand CapEx and the need to hold money aside for major items down the road.

This is my 3rd post on BP and I'm already loving the support everyone provides.  I just sold my rental of 5-years and need to 1031 exchange into a new property ASAP.

I've dove into a couple of opportunities now and have learned a lot on how to analyze deals and look closely at cash flow.  

My latest find is a Tri-Plex built in 1979 that is currently fully occupied.  The property is located right next to a community college that attracts more 25-35 yr olds as opposed to the local party college.  I'll post my calculations below and will include notes/questions below:

PURCHASE PRICE $199,000
CLOSING COST $2,985
CASH TO CLOSE $50,496
LOAN AMOUNT $151,489
REHAB $5,000

MONTHLY RENT $3,090

EXPENSES:
MORTGAGE $836
INSURANCE $125
PROP TAX $453
PROP MANAGER (10%) $309
VACANCY (10%) $309
REPAIRS (5%) $155
MAINTENANCE $50
HOA $0
TOTAL EXPENSE $2,237

CASH FLOW / mo $854

50% Rule...$400

I build in Prop Management just to be conservative but I'm going to manage the property until I get to the 5 property mark.

Now the bad/unknown.

• Each unit has an individual furnace but they are all 25 yrs old.
• The exterior stucco needs patching & painting.
• The roof is stated to be in good condition, but I think its got to be 15 yrs old.
• I'm trying to research how this property might appreciate in value over the years.  At the very least, the cash coming in will get me started to stash money away for the next property.

1. Does this look like a good deal?

2. If I do end up putting a roof, furnaces and new paint will this increase the value enough for me to do a cash-out ReFi?

Thank you,

Trevor

Before you get too excited I had the wind taken out of my sales on this deal.  Two major flaws were brought up by my finance guy.

1. These properties are all located in a semi-shady part of town where properties generally don't appreciate very well.

2. The taxes calculated were based on the value of the homes when purchased in distress back in 2013.  The owner rehabbed the properties which substantially raised the property value which will almost triple the taxes.  It would still be in a positive cashflow situation but nothing compared to what the calculations above show.  When you combine these two factors, I don't think this ones for me.

Good news is there was a triplex that just popped up today that I'm going to see on Friday.  Purchase price $199k currently fully occupied bringing in $3,090/mo!

I live in SW Michigan and there seem to be multi-family properties popping up weekly.  Maybe I should get into the Wholesaling game!

@Giancarlo Orozco

Thanks for the reply.

I’m factoring in the following for Expenses:

Property Manager...10%

Vacancy...10%

Repairs...5%

City Certification...$105

On $1,000 rent this adds up to $355 in estimated expenses. I’m not 100% on board with the property management idea and think between me and my retired father we could handle that task.

If the tenants pay for utilities what other expenses should I factor?

@John Erlanger

Maybe my calculations are off. This is what I’m using:

(Cash Flow+Mortgage)X12/Purchase Price

Thank you for the input.  The property sold yesterday so the search continues.  

My wife and I just sold our rental property of 6 years and I now have $80k of capital coming in. I've been scouring the area for the last few months focusing on multi-family homes and just found what I belive to be a great opportunity.  The listing is for three separate properties all on the same block.  One Duplex and two Single Family homes.  All four units are fully rented and according to the add, great-standing long term tenants.  The Duplex has been completely redone w/ new roof, furnace, electrical, plumbing, hardwood floors, bathroom remodel.  One of the two single families has been completely redone.  The other single family was redone in 2015.

I'm new to BP but have been diving right in. Below are my calculated CAP rates and cashflow projections:

Duplex:

PURCHASE PRICE $130,000
CLOSING COST $1,950
CASH TO CLOSE $32,988
LOAN AMOUNT $98,963

MONTHLY RENT $2,100

EXPENSES:
MORTGAGE $582
INSURANCE $105
PROP TAX $147
PROP MANAGER (10%) $210
VACANCY (10%) $210
REPAIRS (5%) $105
MAINTENANCE $50
CITY CERTIFY $84
TOTAL EXPENSE $1,493

CASH FLOW $607

CAP RATE 10.98%

Single Family 1

PURCHASE PRICE $90,000
CLOSING COST $1,350
CASH TO CLOSE $22,838
LOAN AMOUNT $68,513

MONTHLY RENT $1,250

EXPENSES:
MORTGAGE $405
INSURANCE $65
PROP TAX $112
PROP MANAGER (10%) $125
VACANCY (10%) $125
REPAIRS (5%) $63
CITY CERTIFY $42
TOTAL EXPENSE $937

CASH FLOW $314

CAP RATE 9.58%

Single Family 2

PURCHASE PRICE $65,000
CLOSING COST $975
CASH TO CLOSE $16,494
LOAN AMOUNT $49,481

MONTHLY RENT $1,250

EXPENSES:
MORTGAGE $291
INSURANCE $65
PROP TAX $108
PROP MANAGER (10%) $125
VACANCY (10%) $125
REPAIRS (5%) $63
CITY CERTIFY $42
TOTAL EXPENSE $819

CASH FLOW $432

CAP RATE 13.34%

It appears all my CAP rates look great and this is a solid investment but I'd like to hear from seasoned veterens.

Thank you,

First post on BP and am excited to start my RE future. I'm looking at a 6-unit property that is capable of big cash flow. My calculated CAP rate is 11.53%.

The major snag is 3 of the units share 1 bathroom. The other 3 have their own baths. The projected rents from these 3 rooms reflects the fact they are sharing a bathroom but I’m interested in feedback for investors who have multi units with a shared bath.

Thank you,