All Forum Posts by: Will Porter

At the first board meeting, you could have the members authorize reimbursement of the expenses.

(But always remember the only legal advice you should trust comes from a competent and insured attorney in your local area, not from a stranger on the internet)

Does this analysis also include debt service/mortgage? That can kill the $300/mo cash flow.

Otherwise, using your numbers, that deal appears to have 22.5% cash-on-cash return, which is nothing to sneeze at.

@James Wise cool shirts for your business.

Now what if we wanted a Bigger Pockets shirt? Or something that's more general for our community, not specifically business branded.

Anyone have other ideas?

If you were going to design an REI t-shirt, what would you want it to say?

"70% of ARV"

"REI"

"Bigger Pockets"

"Brandon & Josh Are My Heroes"

"§1031"

I'm terrible at this.

wow @Clay Manship the family-member-HELOC and FHA loan is exactly what I've been thinking about doing. And owner-occupied small multi-family.

It's like we have the same brain.

@Clay Manship  So at the end of the day, you will have only $7,000 skin in the game on a $245,000 property?

If that's true, and with $1200/yr profit, you're making a 17.14% COC return. Not bad.

Kayla you have already answered this in your gut--maybe you just haven't realized it yet. Re-read what you wrote in these two posts and look for the message between the lines.

That price looks too high. Note that your gross rents of $4,400/mo are even less than 1% of the price ($495,000). If we refer to the 2% guideline, your "gold standard" would be in the ballpark of $4,400 / 2% = $220,000. You are paying more than double that.

We also have the 50% guideline, which says that your gross rents will yield expenses of $4,400 x 50% = $2,200/mo. Now throw in your mortgage of $2,214.92/mo and that means negative cash flow. You already noted this in your own analysis.

Just using these simple rules, you should be able to tell that these numbers are not where we want them.

To make this deal work, you will need either a significant discount on the purchase price, or have some way to substantially increase rents (or both).

But remember, your goal is not to fudge the numbers to make the deal work, your goal is to find the deal that fits your numbers.

If you can manage to get the property in a condition that already cashflows enough to yield a profit for you (and you better be certain the numbers the seller is giving you are rock-solid) then why do you need to renovate?

People buy dumpy houses because often that's the only way to get a price low enough to make the deal yield an acceptable return.

But there are unicorns out there, maybe you found one? When you have all the details, post it in the deal analysis forum to get a full run-down from the forumites.

So if your mortgage comes in around $430/mo, and figure 30% of gross rents for property management (10%), maintenance (10%), and capex (10%), that should give you a nice conservative net cashflow of $278-ish a month. Of course, lower expenses will give you more cash profit.

And with downpayment of $28,750, that would work out to about 11.64% cash-on-cash return.