All Forum Posts by: Steve Vaughan

Yep, like @Rob L. points out, know how much you can afford through your lender. Give the agent(s) a price range or price cap. Cap rates on properties under 5 units don't mean much. Give them a GRM you are targeting. My target here is 100x monthly rent, not in the hood. Your area may be different. Do you mind doing work to the property? If not, you could also have them seek some expired's that need work. Remember, you make money at the buy. Anyone can go out and pay full market value. Happy Hunting @Zachary D. !

And I thought your Tri-cities market would have better valuations than here in the Wenatchee Valley!  I'm lucky to find 1% here.  2% is tough about anywhere.  I find when I'm swinging for the fences, I miss a lot of solid doubles and singles.  I would check my backyard again!

One can earn 8%+ easily in other assets that don't involve tenants and toilets, not to mention out of country problems.  Please pass!

I consider the cap rate as the % return on my investment for my time, money and headaches. I apply the cap rate as 1 tool to help find my acceptable purchase price in 5+ unit multi's. I won't be buying anything for a 5% cap rate in any area, as I can buy paper securities that return more than that without tenants & toilets. To find my acceptable purchase price with the income approach to value I simply divide the NOI by my necessary return of 10% for decent property, up to 14%+ for older properties with deferred maintenance issues or in tougher areas. An example would be annual NOI of $32,000/.1 = purchase price of $320,000. But that's just one ratio. As it's been said, we need also to get comps, look at the GRM, COC, debt service coverage/break-even analysis and cost to build. If you are willing to accept a lower return, divide the NOI by that. It's a quick analysis to see if you want to pursue the property any further.

I've never had a dba so I can't advise on security measures involved with them.  I doubt there is any liability protection if that's what you mean.  I will defer to those that know more than I.  Good luck!

@Brad Deffenbaugh  , I didn't realize you already have or are working with an S-corp and LLC. Some get bogged down in establishing the business rather than working on it. Yes, a sole proprietorship would be a d/b/a filed with the state, using your social. As an aside, I have heard the ppwrk and hassle dealing with a trust for each property is a nightmare, especially if you are flipping. I don't hold more than $2mil of RE in any one LLC for liability reasons. A separate entity for each house just sounds painful!

I would not own property in a corporation. Corporations are taxed twice if not subchapter S-elected. An LLC may be better. Either way, your profits from short-term flipping are always taxable. I set up my LLC for anonymity and some liability protections and to keep records cleaner. If establishing an entity is holding you up, just go for it as a sole proprietorship.

Rates can affect housing market appreciation, for one, in that these historically low mortgage interest rates in the 3-4% range allow people to qualify for more house.  Their monthly payment is lower due to the lower rates.  More people can buy more house, so appreciation will usually follow.  Mortgage rates seem to be closely tied to the ups and downs of the 10-yr treasury bill.  I'm assuming you are talking about mortgage interest rates and housing market appreciation?

For me it's about freedom and options, like you mentioned in the OP.  We just left a great t-giving weekend with extended family.  All 5 of my bro and sister-in-laws described their Monday and rest of the week as crazy hectic with work.  Music programs & assemblies to prepare for, huge kitchen & bath remodels homeowners are waiting on, patients waiting on hold for their PT appts...  Professional people stressed out.  Then they got to me.  "So Steve, anything going on next week?"  I'm still slowly unpacking, enjoying a light snow fall, spending some time here on BP!

What are the risks of you putting up the money and credit for a buy and hold property with a partner?  That's the question.  I would start with the Ds: Death, divorce (your new partner may be his ex-wife), drug use, disinterest...   These all need to be addressed in writing.  If I had the money and credit, I would find my own deal!