From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1504 topics, 14360 posts — Last Post 04/16/14, 07:25AM

BiggerPockets Exclusive PRO Area

116 topics, 835 posts — Last Post 04/16/14, 01:04PM

New Member Introductions

10845 topics, 85259 posts — Last Post 04/16/14, 02:49PM

Real Estate Success Stories

392 topics, 6101 posts — Last Post 04/16/14, 02:48PM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5905 topics, 46567 posts — Last Post 04/16/14, 02:35PM

Renters

640 topics, 5788 posts — Last Post 04/15/14, 06:49PM

Get Foreclosure Help - Help Stop Foreclosure Forum

316 topics, 2557 posts — Last Post 04/16/14, 03:58AM

Home Owner Association (HOA) Issues & Problems Forum

237 topics, 1604 posts — Last Post 04/16/14, 01:33PM

Do it Yourself

653 topics, 6257 posts — Last Post 04/16/14, 09:21AM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3655 topics, 29315 posts — Last Post 04/16/14, 02:31PM

Real Estate Guru, Book & Course Reviews and Discussions

1129 topics, 11532 posts — Last Post 04/16/14, 09:34AM

Ask About A Real Estate Company

736 topics, 7286 posts — Last Post 04/15/14, 02:45PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5586 topics, 43651 posts — Last Post 04/16/14, 02:21PM

Rehabbing and House Flipping

3321 topics, 30891 posts — Last Post 04/16/14, 02:26PM

Real Estate Development & New Home Construction

551 topics, 4678 posts — Last Post 04/14/14, 01:02AM

Innovative Strategies

699 topics, 5992 posts — Last Post 04/16/14, 12:50PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

863 topics, 6654 posts — Last Post 04/16/14, 02:24PM

Rent to Own a.k.a. Lease Purchase, Lease Options

690 topics, 4856 posts — Last Post 04/16/14, 01:57PM

1031 Exchanges

142 topics, 1051 posts — Last Post 04/16/14, 01:24PM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1686 topics, 11281 posts — Last Post 04/15/14, 03:20AM

HUD, VA, and Tax Sales

414 topics, 3085 posts — Last Post 04/14/14, 06:29PM

REOs

1212 topics, 10563 posts — Last Post 04/15/14, 01:08PM

Short Sales

1533 topics, 13117 posts — Last Post 04/15/14, 07:10PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7186 topics, 70502 posts — Last Post 04/16/14, 02:38PM

Mobile Homes & Mobile Home Park Investing

636 topics, 5127 posts — Last Post 04/15/14, 09:59PM

Investor Basics

Starting Out

7674 topics, 60268 posts — Last Post 04/16/14, 02:51PM

Investor Psychology

430 topics, 6092 posts — Last Post 04/14/14, 06:53PM

General Real Estate Investing

4710 topics, 37142 posts — Last Post 04/16/14, 02:42PM

Real Estate Investor Marketing

1728 topics, 14073 posts — Last Post 04/16/14, 02:05PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1408 topics, 8971 posts — Last Post 04/16/14, 02:36PM

Multi-Family and Apartment Investing

1101 topics, 9165 posts — Last Post 04/16/14, 12:58PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

638 topics, 4883 posts — Last Post 04/15/14, 01:41PM

Business Basics

Goals, Business Plans & Entities

827 topics, 7526 posts — Last Post 04/15/14, 07:32PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2782 topics, 19979 posts — Last Post 04/16/14, 02:23PM

Property Insurance

309 topics, 2041 posts — Last Post 04/16/14, 02:16PM

Personal Finance Discussion

328 topics, 2704 posts — Last Post 04/16/14, 02:14PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2824 topics, 19659 posts — Last Post 04/16/14, 02:29PM

Creative Real Estate Financing

1206 topics, 8758 posts — Last Post 04/15/14, 02:21PM

Crowdfunding Real Estate

35 topics, 455 posts — Last Post 04/14/14, 02:14PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1204 topics, 7945 posts — Last Post 04/16/14, 01:41PM

Bankers, Lenders, and Mortgage Brokers

440 topics, 1917 posts — Last Post 04/15/14, 07:37AM

Contractors

261 topics, 1656 posts — Last Post 04/16/14, 06:23AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

1981 topics, 11561 posts — Last Post 04/16/14, 02:21PM

Americans & International Real Estate

161 topics, 566 posts — Last Post 04/14/14, 11:19AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

64 topics, 426 posts — Last Post 04/16/14, 08:34AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

14982 topics, 53855 posts — Last Post 04/16/14, 01:08PM

Real Estate Events and Happenings

162 topics, 2437 posts — Last Post 04/16/14, 02:44PM

Off-Topic

Off Topic

Off-Topic

2901 topics, 32397 posts — Last Post 04/16/14, 10:12AM

Housing News & Real Estate Market

913 topics, 8339 posts — Last Post 04/16/14, 01:11PM

BiggerPockets Real Estate Investing Summit

97 topics, 1751 posts — Last Post 04/10/14, 02:27PM

BiggerPockets Resources

Forums » Buying & Selling Real Estate » Investment analysis

Investment analysis

5 posts by 3 users

Signup

· Weymouth, Massachusetts


The snow is starting to fly here in the Northeast and I’m trapped in doors for the next 24 hours.

With the free time I thought it a good chance to get reassurance that my current deal is a good one.

I bought a 2 family about 15 years for $120k, remodeled it slowly and rented it steadily for 10 years. It’s been a cash cow and I paid the property off a few years back. I get $2400 positive cash flow per month and could easily get more.
So, Ive been a landlord for a ong time and no the ins and outs.

I took out a home equity line of credit on it and purchased a bank owned 2 family for 180k a few months back. This needed a fair amount of work but is in a good town with lots of high end properties. My house is on the bad side of town because the surrounding houses are smaller don’t go for over a million. Remodel costs will be $90k (all out of pocket) when all said and done, more than I estimated but this goes with bank owned properties.

When finished it would sell for approximately $399k (smaller lot, bad side of town, no water view).

I just rented first unit for$1500/month and expect to get same for second unit next month. I was planning on refinancing and paying the equity line off and taking back the out of pocket remodel costs ($250k note). I do however need to wait the six months to refi. I will not have any management costs (I can handle all maintenance calls). Taxes and insurance will be $350/month.

Would you have made the same deal?



Rehabber · Santa Clarita, California


The second deal you purchased looks like a great one for a flip. All-in for $270k and exit at $399k is a 67.7% all-in deal which i would consider a home run in this market.

As a buy and hold, you only get $3000 gross monthly after putting $270k into it, just slightly over a 1% rent to acqusition ratio. Since this is a higher end home, that may equate to a small cash flow, but not much once you take into consideration all the costs.
I would flip that deal and use the funds to find another flip and/or another buy and hold with better cash flow.


Small_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Real Estate Investor · Southport, Connecticut


@Paul Tyrell I agree with @Will Bernard on this. You may have a bit more than 270k all-in (don't forget to count your out-of-pocket for debt service, taxes, insurance while you were re-habbing), but if you can sell for 399k then you'll have a very handsome profit indeed. While I don't have all your numbers, on the surface it looks like it probably would not be nearly as profitable if held as a rental property, so selling seems like your best course.

And since it could be more attractive to an owner-occupant than to an investor, you might want to consider leaving that one unit vacant for a bit while you look for a buyer.


Small_logo_realdataFrank Gallinelli, RealData
Telephone: 800-899-6060
Website: http://www.realdata.com
-- www.realdata.com


· Weymouth, Massachusetts


Thank yu for both responses, but to inquire further my rehab costs included all expenses to include liabilty insurance premiums, utilities, heating costs during rehab, etc. Its not clear to me what I may be forgetting to make the correct decision between flipping and holding



Rehabber · Santa Clarita, California


Originally posted by Frank Gallinelli:
You may have a bit more than 270k all-in (don't forget to count your out-of-pocket for debt service, taxes, insurance while you were re-habbing),
Just to be clear so that everyone understands, when I say "ALL-IN" when referencing rehab flip deals, it means acquisition price plus rehab costs. The "holding costs" (taxes, insurance, utilities, maintenance, debt service, etc.) all come out of the gross spread. So if you are All-in at 70% or less of exit value, you have 30% to cover resale costs (agent fees, escrow, title, recording fees, etc), holding costs (mentioned above), acquisition costs (usually very small amount which includes your portion of purchase escrow fee, recording fees, sub escrow fee, etc.) and your net profit (before income taxes).

This is why the 70% rule (requires adjustment per market and per price points) is a simple and easy to evaluate a rehab flip deal.

Its not clear to me what I may be forgetting to make the correct decision between flipping and holding

Are you referring to all holding costs of a flip or buy and hold?

For a flip, you have property taxes, insurance, utilities, lawn care, pool care, house cleaning, HOA dues, and debt service (of course not all apply always).

For buy and hold, if you use the 50% rule, it is easy to calculate and allows for everything other than debt service. So if rent is $3000 monthly gross, then proceeds after 50% rule is $1500 which is what you have left for debt service and cash flow. The other 50% goes towards property management, repairs, damage/vandalism caused by tenants beyond security deposit, tenant placement fees, advertising, vacancy, loss to rent, legal fees, accounting fees, capital expenses (new roof, new HVAC, new electrical, new plumbing, etc), eviction costs, utilities not paid by tenants, common ground maintenance, lawn care/pool care (unless contract states tenant pays) and etc. . . .


Small_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com




Sign up