All Forum Posts by: Thomas Shaw

Hello,

I'm a reasonably new investor(got one rental) and I have been offered to get in on a deal(s) through a trusted family member. His niche is very different from what I am familiar with, so I'm having some trouble running the numbers and I thought I'd turn to you guys.

So he(my relative) has been doing this exact strategy for a few years and has done a good number of deals(~40) so I'm confident he knows what he's doing, but his strategy is as follows:

Buys a distressed trailer(mobile/manufactured home) repairs it, and then sells it to a tenant that either can't qualify for a normal  loan, or doesn't have the money to purchase a normal home.

So for this particular deal, the numbers are as follows.

Purchase price of $5750.

Rehab of $8000.

Rehab should take roughly 3-5 days.

Selling we are assuming a month, but he says typically less.

Taxes are around 600/yr(which the new owner will pay) but accounting for the month we have it, $50.

The lot rent for the trailer is $350.

Closing costs would be maybe ~$100.

We'd sell it for ~22k, with a down payment of 2k at 14% interest for 75 months.

So our purchase and rehab would be ~$13850, plus a month of holding for $14250.

We'd get 2k back bringing our investment back down to $12250.

We'd bring in 400/mo from the mortgage payment.

As far as I can tell, this would be about 35-40% cash on cash return.

Please go over these numbers and tell me if I'm missing anything.

I should be able to make it.

So I just wanted to post an update!

I signed the lease today. My tenants move in 7/1.

I actually ended up doing things a bit differently than planned, but I think I'm still happy with the results.

A couple approached me about wanting to rent it all out as a 3/2(instead of a 2/1 and a 1/1 as I had planned.)
They were only willing to pay 1500(which is still above my lowest happy price point of 1400)

But, the tenant is very handy(he's actually a civilian contractor at a local Air Force base) and is willing to do all maintenence and repairs and upkeep himself. I'll just be covering materials. Plus they signed a two year lease.

So it isn't quite as much money as I had hoped for, but hopefully it will be much less to deal with.

So the final numbers come out to be 1500 a month, but I knocked down the amount I had for repairs a little bit(from 8% to 5%) and that puts my COC ROI at 13.2%. Not a homerun, but surely not too bad for my first deal.

@Acaiah Howard

So I will be honest. For this particular house, the ARV isn't super important. It was sold to me a bit under market, but it needed no repairs. But due to being a duplex and a single family home price, it was a good deal just based on the cash flow.

I was in your situation though until I just decided to reach out to a few random real estate agents(from Zillow) and just started asking the one that responded first questions.

I was completely honest with him about being a new, totally inexperienced investor, and he was willing to answer my(dumb) questions.

I asked him for ARVs on houses, what sort of rents I could expect in the different areas I was looking in, and he answered everything.

I'd say if you're paralyzed from just trying to analyze and getting stumped, maybe you should try and just reach out to someone and see how it goes. You've got nothing to lose. Embarrassment never killed anyone.

@Account Closed

I live in the subdivision directly across from those town homes(also right next to the VFW, right?)

Everytime I drive out of my neighborhood I always see those and wonder how the owner is doing. They seem like they would be good properties with decent rent.

I know right next to them there are a few new construction duplexes that are being built/almost done. So I assume the market must be decent for things like that.

But it's always great to hear stories like yours where people can bounce back from a really bad string to do even better than they were.

@Jeff Lee

Thanks for the info on PM. I'll definitely have to adjust some numbers in the future.

For the first few properties I plan on self managing, so it won't be an issue for a bit.

How do you run the numbers? Do you just always assume the worst case of a new tenant every year?

Welcome to BP.

I'm from Pearland as well and I just closed on my first deal a couple weeks ago. Keep reading and learning.

If you get a job in finance, if you are smart with your money, you will have quite a bit of liquid assets to invest in whatever you want with once you're ready. Keep your savings rate high and don't let lifestyle inflation get to you too much.

@Ken Breeze I hope to have at least one other property by the end of the year!

@Jessica G. I actually got really lucky and hooked up with an agent who was friends with the guy selling it, and got it before it ever hit the market.

But don't let that discourage you, there were a few other properties I wanted just from scouring the MLS that I didn't get for one reason or another. So there are definitely deals to be had that are available to the public, you just have to be diligent in checking every day.

@Dave Fagundes

I actually didn't pay any points other than the .04 that was the cost of the loan itself. They offered to let me pay for a lower rate, but I was pretty happy with the rate.

I went with BoA. And while it was not a very smooth process at all and I will likely never use them again, I am happy with the rate they offered.

Good luck man. I'm not sure how long you've been contemplating jumping in, but now that I've done it, I'm much happier than when I was just contemplating it. And I haven't made a dime yet.