All Forum Posts by: William C.

..."As I'm trying to enter the world of larger multi-families I am being told my offers are too low. I lost a deal where my number said 1.3 mil was my top price the property sold for about 2 mil to an out of state investor. How can I be .7 mil off in my numbers? " Easily. Your competitor was willing to buy at a 7 cap when you needed a 10 cap. In this market most investors would Kill for a 7 cap. I just read a thread about 3% cap rates in relation to the new podcast! With that said you need to know the market and what units are worth. What's it cost to build a new one? Are there new units being built? Is it more expensive just to permit a unit than it is to buy one? What are comps selling for? Numbers on a page aren't going to get you very far. If that's the only way you are deciding the value I can see why you were off by $700,000. Are you planning on purchasing on your own of bringing on partners? If I were in your position I'd be looking for some help and start putting a team together. A local agent and lender would be my first addition and I'd go from there. It might be a good idea to bring on other experienced investors for the first one just to make sure it's a base hit. 50% of a good deal is way better than 100% of no deal or even worse a bad deal. Best of luck in you search, unfortunately there's just too many variables that go into valuation on deals of this size that it's going to be nearly impossible for me to help you get closer without being on he ground and in the same market with you.

Oren K. Here in the US of A most forms are state specific.

I would agree with the poster above regarding the MLS. In this market, if a home is still listed on the MLS it's overpriced. Simple as that. Any home listed that is worth close to asking price is sold within days. So maybe take another look at the MLS and see what you can find. Also, one line I always use when showing homes to a buyer and they say it's overpriced, "at what price would it make sense for you to buy it". Then go from there. Remember that an asking price is just that, their asking price. If everyone was able to get their asking price we would all ask for a bagillion dollars and we'd all be bagillionaires. Markets don't work that way.

As others have noted, insurance seems low. Especially with the age of the home. For example we have a triplex that was quarts at $2200, then rose to $2700 when they obliged the correct age of the home. (Similar to yours). Confirm the Utilites are included in taxes. Again, our triplex gets hit 3x for sewer because of the number of units. I assumed since the township handled the sewer that it was accounted for in the taxes. It wasn't. Also it's unlikely you get a 30 year amort. I'd run the numbers on 20, maybe 25 if you know of a portfolio lender that will offer it.

If you invested $250,000 cash then that would be how you calculate your ROI. If any of that $250k is part of the line of credit then it's not your cash in cash return. I think you really need to figure out what YOUR goals are and what you want to do in the future in order to get the right answer to your question. The community needs A LOT more information to even begin giving half decent advice. Also, you mentioned the full time employee. What another poster was saying was you should try to calculate what the cost to renovate a home is. Then you can add all other expenses like carrying costs and cost to acquire to have a "total cost". Then if you were to sell you'll have an accurate profit. Otherwise for example you could buy a home for $50k, buy $10k worth of materials and assume your total cost was $60k. But if you paid your employee $20k for labor to renovate then sold the home for $75k you would be losing money. This is an extreme example but I'm trying to illustrate why you calculate expenses this way so you can have a true picture of what a home cost you. Do you need the cash flow or do you need a lump sum of cash? The way I decide whether to hold a property or whether to flip it is to determine what the income would be on a yearly basis. For example $6000 a year. If I could sell it for a $60,000 profit, it would take me roughly 10 years to earn the same $60,000 if I held it. Of course I'm not accounting for principal reduction but I also wouldn't have to deal with tenants and management and repairs etc etc. So for this property how much will it cash flow each month? How much will your profit of you sell? Also, it appears your doing a great job. Id do a little more research or read some books on the numbers side of the business. For example each rental you listed has its own expenses. They are all probably different. If you lined up all your rentals you would see, according to the 80/20 rule, that you are actually earning 80% of your income for only 20% of your properties. Seems extreme, it's not. You might even be losing money each year on some properties and not know it. My point is you sure have a clear picture of how each property performs on a monthly basis and you'll be able to make better decisions on what to do with them. It would be pretty easy to sell a property if it's losing money right? With all that said, I would just keep doing what your doing if all your numbers are accurate. Your doing something right. Not too many people on this site have been able to find that many deals at such rock bottom prices. I will say that we are at or at least bearing the top of the market in terms of price. In other words I think you can't go wrong by selling right now. Whether interest rates go up, or supply increases, or Trump does something crazy I feel a market correction looming in the next 12 months if not sooner.

By paying the mortgage down faster this does not increase the cash flow whatsoever? The monthly payment doesn't change now that you have paid it down further. An amortization schedule is based on payments over the life of the loan and do not readjust if you happen to pay it faster. Someone mentioned they would do this for 3 years and then rent it and at that point would have a higher cash flow as a result. That is false. The mortgage payment amount will be the same at the point. Your principal balance would be lower but not the payment. With that said, I would never do this myself. To each their own. I'd rather have the cash in hand to be reinvested. Plus as mentioned above, once it's paid, it's not easy to get back. In fact it's impossible to get back without refinancing in some way or getting a HELOC. So your going to pay a balance down, then pay the bank interest on that same money to borrow it back? Mortgage rates are in the 4s. You'd be better off putting that money in the stock market or some type of fund. Historically they average 8-10%? Earning 8% sounds better than saving 4%. Not to mention the power of compounding interest.... Lastly, simply elect for a shorter term when you get the mortgage if you want to pay it off faster. You'll at least benefit from a lower mortgage rate by doing this.

@daniel Y , I either misunderstood for your post, or I have to disagree with you completely. Banks are MUCH more susceptible to lend as a primary residence on an SFR. They require FAR less down, meaning a much higher LTV, they don't require the same kind of reserves, and underwriting is much easier. So again I may have misunderstood you, but just wanted to clear that up. Banks would much rather the borrower live in the home. There's a greater chance a borrower will pay if it's their residence.

Good for you $6000+ makes a little more sense. I know that cap rent isn't necessarily used for valuation but as an investor I'd find it hard to pay $900 a property with cash flow of $5000. You explanation helps to clarify the market rents though and I'm not at all doubting you, just wanted to see how the numbers worked out. Great podcast and great work so far. Keep growing.

Maybe someone can help explain how this duplex was valued at over $800k? She mentioned is rents for $2000/month. Assuming the other unit rents for about the same....$800k would be about a 3% cap rate.

Hopefully the lawsuit regarding the Zestimate gains a lot of traction and sellers realize it's. It accurate. Personally as an agent I know how to "hack" the Zestimate and make the value appear to be a lot more than usual. Zestimate aside, id like to hear other investors thoughts on the instant offer program. Like mentioned above, Zillow is entering the wholesaling space. Good bad or ugly it's going to affect investors one way or another. I have no doubt it expands beyond their test markets.