Another potential deal that I am trying to figure out

[Helene Goodworth]

ok guys and gals. 

I learned my lesson from the last one. I was missing a lot of data. This time I decided to make my own spreadsheet instead of using someone else's. It is moderately detailed. The grey areas are the areas in which I can add data. The rest are formulated. I have one box with costs (both listed and what i would offer). The next box has income (both what is listed and what is market value). The next is ROI (I hope I did the right calculations). If any of it doesn't make sense let me know.

I really loved the advice on my last post so am welcoming any advice again this time. It's the best way to learn!

[Helene Goodworth]

Please be aware that some of these numbers are of course a guestimate. I will be updating them as I go along but it's just a rough idea of how the property cash flows

[Michael Quarles]

Good to say hello.  Hello. 

Am I reading your sheet correctly.  Are you thinking of investing 117k on a deal?  

That’s crazy!   Please learn seller financing and sub2 financing.  Keep your cash and only invest in deals that your exposure isn’t more than 10%

A rule that has always worked for me is to never try to make a deal be a deal.  

Deals are like good looking people.  When you see one you know.  

[Helene Goodworth]

Quote from @Michael Quarles:

Good to say hello.  Hello. 

Am I reading your sheet correctly.  Are you thinking of investing 117k on a deal?  

That’s crazy!   Please learn seller financing and sub2 financing.  Keep your cash and only invest in deals that your exposure isn’t more than 10%

A rule that has always worked for me is to never try to make a deal be a deal.  

Deals are like good looking people.  When you see one you know.  

I'm utilizing a DSCR loan due to my current lack of reported income. The 20% down payment isn't a concern for me; my primary focus is ensuring the investment generates positive cash flow, which is what my post was aimed it. While I appreciate your advice, I may be better suited to follow it once I have a more consistent revenue stream and better connections.

Thanks!

[Michael Quarles]

Hi.  I must say I learn something new everyday. 

What does DSCR stand for?

Getting back to the 20%.  Of the 1000 plus deals I’ve never put down 20%. My very first deal was seller financed.  I always worry when people putting large sums of liquid assets into deals.  

Although real estate seems to always increase in value there are times when it feels like a jagged knife.  

[Alecia Loveless]

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

[Helene Goodworth]

Quote from @Alecia Loveless:

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

 Thanks so much for your input Alecia. I must admit I did second guess myself for a moment there, but I have gone over every possible financing scenario that I could think of (that I know of) and this is the best one for me now. 

It's great to hear that you have been successful! I wish I could take you out for a coffee/margarita and talk about your journey and pick up some tips but that may be a bit of a drive for either of us. If you ever find yourself down here please let me know! I'll do the same.

[Karolina Powell]

This looks decent but you don't have a capex line.  Are there any large capex items you are expecting?  Also your utilities line isn't calculating correctly

[Helene Goodworth]

Quote from @Karolina Powell:

This looks decent but you don't have a capex line.  Are there any large capex items you are expecting?  Also your utilities line isn't calculating correctly

 Yes sorry it's super hard to read. 

There is a line at the very top for 'improvements'. Is that what you mean by capex? I hadn't viewed the property when I made the spreadsheet so I wasn't sure on what would need fixing yet. 

The 'utilities' cell is the annual amount of landlord utilities divided by 12 because every other cell was monthly. It's hard to see that without seeing the formula within the cell. Then it's gross income minus every expense that equals the NOI. I threw this together in one night and couldn't figure out the best way to display it. Haha. Any advice is welcome!! I'd love to make this spreadsheet super readable.

[Helene Goodworth]

Quote from @Helene Goodworth:

Quote from @Karolina Powell:

This looks decent but you don't have a capex line.  Are there any large capex items you are expecting?  Also your utilities line isn't calculating correctly

 Yes sorry it's super hard to read. 

There is a line at the very top for 'improvements'. Is that what you mean by capex? I hadn't viewed the property when I made the spreadsheet so I wasn't sure on what would need fixing yet. 

The 'utilities' cell is the annual amount of landlord utilities divided by 12 because every other cell was monthly. It's hard to see that without seeing the formula within the cell. Then it's gross income minus every expense that equals the NOI. I threw this together in one night and couldn't figure out the best way to display it. Haha. Any advice is welcome!! I'd love to make this spreadsheet super readable.

 This is my 'results' page which is even harder and more chaotic to read. I can understand it but I doubt anyone else would...

[Michael Quarles]

Quote from @Alecia Loveless:

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

Why are you always putting 20% down?   I’m perplexed.  

[Don Konipol]

Quote from @Michael Quarles:

Quote from @Alecia Loveless:

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

Why are you always putting 20% down?   I’m perplexed.  

What makes a “good” deal can differ enormously from person to person.  Low down payment is a significant part of your criteria, Michael, and it obviously fits your personal needs, wants, financial position, goals….
But for myself, for instance, ability to pay a low dp is of absolutely no importance.  My main criteria is purchasing below market value, with a 12% or better ROI.  In fact, it’s a LOT easier to find a good / great below market deal if (1) you offer all cash, quick close, NOT subject to financing and or (2) the property is one in which obtaining financing is difficult, if not impossible.

Another example of where low DP is not preferable is when we syndicate property purchases.  We almost always utilize 50% leverage.  The reason is that we have a relationship with a regional bank that will provide financing and which if we limit leverage to 50% will (1) charge interest at their lowest commercial rate fixed for 20 years with no balloon, (2) charge 0 origination points and no “junk” fees and(3) allow us to sell the property with either a sub to or a wrap loan without increasing the interest rate - in other words no due on sale clause.  We sold one property this year where we wrapped the 4% mortgage note into a 10% note and as a result are enjoying a 17% annual ROI for a minimum of 2 years and possibly as long as 10 years if the borrower/buyer does not pay us off early.

After 40+ years of real estate investing, in many different markets across the country during many different economic climates, both in residential and (primarily) in commercial, I can tell you that hard and fast “rules” should be constantly evaluated to see if they are limiting the opportunity to “jump start” your wealth building.  

[Patience Echem]

Quote from @Don Konipol:

Quote from @Michael Quarles:

Quote from @Alecia Loveless:

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

Why are you always putting 20% down?   I’m perplexed.  

What makes a “good” deal can differ enormously from person to person.  Low down payment is a significant part of your criteria, Michael, and it obviously fits your personal needs, wants, financial position, goals….
But for myself, for instance, ability to pay a low dp is of absolutely no importance.  My main criteria is purchasing below market value, with a 12% or better ROI.  In fact, it’s a LOT easier to find a good / great below market deal if (1) you offer all cash, quick close, NOT subject to financing and or (2) the property is one in which obtaining financing is difficult, if not impossible.

Another example of where low DP is not preferable is when we syndicate property purchases.  We almost always utilize 50% leverage.  The reason is that we have a relationship with a regional bank that will provide financing and which if we limit leverage to 50% will (1) charge interest at their lowest commercial rate fixed for 20 years with no balloon, (2) charge 0 origination points and no “junk” fees and(3) allow us to sell the property with either a sub to or a wrap loan without increasing the interest rate - in other words no due on sale clause.  We sold one property this year where we wrapped the 4% mortgage note into a 10% note and as a result are enjoying a 17% annual ROI for a minimum of 2 years and possibly as long as 10 years if the borrower/buyer does not pay us off early.

After 40+ years of real estate investing, in many different markets across the country during many different economic climates, both in residential and (primarily) in commercial, I can tell you that hard and fast “rules” should be constantly evaluated to see if they are limiting the opportunity to “jump start” your wealth building.  

 Thanks, Don, for sharing this. It is helpful for us newbies to hear different perspectives. Varied perspectives help in making sound decision. Appreciate  

[Michael Quarles]

Quote from @Don Konipol:

Quote from @Michael Quarles:

Quote from @Alecia Loveless:

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

Why are you always putting 20% down?   I’m perplexed.  

What makes a “good” deal can differ enormously from person to person.  Low down payment is a significant part of your criteria, Michael, and it obviously fits your personal needs, wants, financial position, goals….
But for myself, for instance, ability to pay a low dp is of absolutely no importance.  My main criteria is purchasing below market value, with a 12% or better ROI.  In fact, it’s a LOT easier to find a good / great below market deal if (1) you offer all cash, quick close, NOT subject to financing and or (2) the property is one in which obtaining financing is difficult, if not impossible.

Another example of where low DP is not preferable is when we syndicate property purchases.  We almost always utilize 50% leverage.  The reason is that we have a relationship with a regional bank that will provide financing and which if we limit leverage to 50% will (1) charge interest at their lowest commercial rate fixed for 20 years with no balloon, (2) charge 0 origination points and no “junk” fees and(3) allow us to sell the property with either a sub to or a wrap loan without increasing the interest rate - in other words no due on sale clause.  We sold one property this year where we wrapped the 4% mortgage note into a 10% note and as a result are enjoying a 17% annual ROI for a minimum of 2 years and possibly as long as 10 years if the borrower/buyer does not pay us off early.

After 40+ years of real estate investing, in many different markets across the country during many different economic climates, both in residential and (primarily) in commercial, I can tell you that hard and fast “rules” should be constantly evaluated to see if they are limiting the opportunity to “jump start” your wealth building.  

I would much rather buy at 65-70% of As Is value utilizing sub2 and seller financing with zero to very little down then wholetail the property.  it’s certainly more difficult to find and negotiate however I don’t have much exposure   And little at risk capital   

Ultimately it’s more enjoyable to me   

[Isadore Nelson]

Quote from @Michael Quarles:

Quote from @Don Konipol:

Quote from @Michael Quarles:

Quote from @Alecia Loveless:

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

Why are you always putting 20% down?   I’m perplexed.  

What makes a “good” deal can differ enormously from person to person.  Low down payment is a significant part of your criteria, Michael, and it obviously fits your personal needs, wants, financial position, goals….
But for myself, for instance, ability to pay a low dp is of absolutely no importance.  My main criteria is purchasing below market value, with a 12% or better ROI.  In fact, it’s a LOT easier to find a good / great below market deal if (1) you offer all cash, quick close, NOT subject to financing and or (2) the property is one in which obtaining financing is difficult, if not impossible.

Another example of where low DP is not preferable is when we syndicate property purchases.  We almost always utilize 50% leverage.  The reason is that we have a relationship with a regional bank that will provide financing and which if we limit leverage to 50% will (1) charge interest at their lowest commercial rate fixed for 20 years with no balloon, (2) charge 0 origination points and no “junk” fees and(3) allow us to sell the property with either a sub to or a wrap loan without increasing the interest rate - in other words no due on sale clause.  We sold one property this year where we wrapped the 4% mortgage note into a 10% note and as a result are enjoying a 17% annual ROI for a minimum of 2 years and possibly as long as 10 years if the borrower/buyer does not pay us off early.

After 40+ years of real estate investing, in many different markets across the country during many different economic climates, both in residential and (primarily) in commercial, I can tell you that hard and fast “rules” should be constantly evaluated to see if they are limiting the opportunity to “jump start” your wealth building.  

I would much rather buy at 65-70% of As Is value utilizing sub2 and seller financing with zero to very little down then wholetail the property.  it’s certainly more difficult to find and negotiate however I don’t have much exposure   And little at risk capital   

Ultimately it’s more enjoyable to me   

 You've found 100 deals with seller financing and sub2 arrangements? That's impressive.

[Michael Quarles]

Quote from @Isadore Nelson:

Quote from @Michael Quarles:

Quote from @Don Konipol:

Quote from @Michael Quarles:

Quote from @Alecia Loveless:

@Helene Goodworth I always put 20% down. But sometimes the appraisal comes back higher so I end up with extra equity after closing.

I have a great relationship with my primary lender and they require at least 20% down. They’re willing to work with me and are local to my market. They don’t sell off their mortgages so I will always have a local connection in case I need assistance with the loan or any other aspect of my business.

There’s plenty of good reasons to put 20% down and to me, not being concert leveraged is of primary concern.

Why are you always putting 20% down?   I’m perplexed.  

What makes a “good” deal can differ enormously from person to person.  Low down payment is a significant part of your criteria, Michael, and it obviously fits your personal needs, wants, financial position, goals….
But for myself, for instance, ability to pay a low dp is of absolutely no importance.  My main criteria is purchasing below market value, with a 12% or better ROI.  In fact, it’s a LOT easier to find a good / great below market deal if (1) you offer all cash, quick close, NOT subject to financing and or (2) the property is one in which obtaining financing is difficult, if not impossible.

Another example of where low DP is not preferable is when we syndicate property purchases.  We almost always utilize 50% leverage.  The reason is that we have a relationship with a regional bank that will provide financing and which if we limit leverage to 50% will (1) charge interest at their lowest commercial rate fixed for 20 years with no balloon, (2) charge 0 origination points and no “junk” fees and(3) allow us to sell the property with either a sub to or a wrap loan without increasing the interest rate - in other words no due on sale clause.  We sold one property this year where we wrapped the 4% mortgage note into a 10% note and as a result are enjoying a 17% annual ROI for a minimum of 2 years and possibly as long as 10 years if the borrower/buyer does not pay us off early.

After 40+ years of real estate investing, in many different markets across the country during many different economic climates, both in residential and (primarily) in commercial, I can tell you that hard and fast “rules” should be constantly evaluated to see if they are limiting the opportunity to “jump start” your wealth building.  

I would much rather buy at 65-70% of As Is value utilizing sub2 and seller financing with zero to very little down then wholetail the property.  it’s certainly more difficult to find and negotiate however I don’t have much exposure   And little at risk capital   

Ultimately it’s more enjoyable to me   

 You've found 100 deals with seller financing and sub2 arrangements? That's impressive.

It’s Not difficult.  One just needs to understand how it’s a benefit to all parties and how to negotiate the terms. Seller financing is by far the best financing option.  

[Helene Goodworth]

OK, so I have updated my spread sheet. The initial spreadsheet was just hours old and therefore was a little rough. I think it makes a little more sense now. 

If anyone would like to give me advice on this deal I would love that! I appreciate you all so much. Thanks!

[Isadore Nelson]

Quote from @Helene Goodworth:

OK, so I have updated my spread sheet. The initial spreadsheet was just hours old and therefore was a little rough. I think it makes a little more sense now. 

If anyone would like to give me advice on this deal I would love that! I appreciate you all so much. Thanks!

Sent you a DM.

[Luke Bricca]

@Helene Goodworth your assumptions (vacancy, R&M, etc.) look correct. However, where you could get into trouble are your rents (not to say they're wrong, but if they are you could buy into a deal that does not pencil). If you're pulling rents from a service like Rentometer, they're historically very inaccurate.

In my experience, the best rents come from going onto Zillow, looking within the same neighborhood/subdivision (usually within 0.25mi of the subject property), and filtering specifically for properties that have rented in the last 3mo (with similar sqft). The differences in bed/bath counts actually do not matter that much, but typically sqft does.

If you are off by even $100/mo per unit rent-wise, this could turn an 8% CoC return into a 3% CoC return instantly - in which case you'd have been better off just putting your money in the S&P500 and not a rental property.

[Helene Goodworth]

Quote from @Luke Bricca:

@Helene Goodworth your assumptions (vacancy, R&M, etc.) look correct. However, where you could get into trouble are your rents (not to say they're wrong, but if they are you could buy into a deal that does not pencil). If you're pulling rents from a service like Rentometer, they're historically very inaccurate.

In my experience, the best rents come from going onto Zillow, looking within the same neighborhood/subdivision (usually within 0.25mi of the subject property), and filtering specifically for properties that have rented in the last 3mo (with similar sqft). The differences in bed/bath counts actually do not matter that much, but typically sqft does.

If you are off by even $100/mo per unit rent-wise, this could turn an 8% CoC return into a 3% CoC return instantly - in which case you'd have been better off just putting your money in the S&P500 and not a rental property.

Thank you! Thats great advice. I got my 'market' numbers from the MLS. I pulled every 1bed/2bed/3bed/4bed listing that was rented over the last 180 days and then found the average and median amounts. I've been doing it for every area that I have found a 1% deal. Than once I get that info I run the property through the spreadsheet to see how good it actually is. If you can give me any suggestions of how to improve this I would love any advice. I'd love to make this process a lot more streamlined.

[Luke Bricca]

@Helene Goodworth the only advice I'd give is that rents in a market as a whole are not usually the best way to approximate what your specific property would rent for. I really only try and use comps within a 0.25mi radius (0.5mi radius at max).

[Helene Goodworth]

Quote from @Luke Bricca:

@Helene Goodworth the only advice I'd give is that rents in a market as a whole are not usually the best way to approximate what your specific property would rent for. I really only try and use comps within a 0.25mi radius (0.5mi radius at max).

Thanks so much! I have been a little lax on the rents. I was wondering if I should use the HUD website to figure out my numbers. Would you say that was a good idea or not? Some of these properties don't have any other rentals in .25 of a mile.