All Forum Posts by: Adam Gollatz

The 1%(2%) rule is a thumb rule or a guideline to help you quickly analyze a deal for cash flow. If you are looking for cash flow, it is extremely important. Its going to be market and price point specific. What I mean is that a 400k property bringing in 4k a month will likely cash flow. A 50k property at 500/mo rent will likely lose money every month. 

Your best bet, analyze several different deals at different price points in your target market and start to see where the breakeven point is for cash flow. Factors like taxes, expenses, and financing terms will also impact where the breakeven point is. Again, its just a ballpark to determine whether a deal warrants a closer look.

Could be a few reasons, but I would say it is because he owes more than its worth, so you would likely have to negotiate with the bank to take a loss. Or you could be the 5th wholesaler thats contacted him and he doesn't want to deal with it anymore.

The simple answer, Yes. Unless you are looking to leave some of the rehab money in the deal, ie buy for 80k put in 30k, and refinance for 100k. Youre all in for 110k, but got out 100, so you "left" 10k in the deal.

Thats correct. Once you repair it, the rent should go up as well. You either over rehabbed it or overpaid/bought a lot of deferred maintenance in that example.

My advice is make sure you factor in property management, even if you are self managing. If you dont, you are tied to managing it, hoping rents increase enough to cover it in the next few year or stuck taking a loss.

Long term tenants usual equal below market rents and deferred maintenance/updates. Whats that situation look like? And how old is the house? Id say you might want to budget more like 15-18% for repairs and capex depending on the age and the expectation of upgrades expected in the area.

You should have 60 days to occupy the property. So if you can get the basement converted to a studio in that time frame, everything should be legal. biggest hurdle I imagine would be getting proper zoning to add the unit.

Unless you're a cash buyer, Id suggest you find a realtor and start combing through the MLS. Redfin/zillow/trulia are good places to start to get an idea of the market, price points, etc.

Hi Mike - I dont have any articles that would help you master it, but it sounds like you got a grasp on the basic concepts. If house hacking is your goal, look for articles on analyzing small multifamily 2-4 units. No shortage of info on that subject. Next step is applying it to your target market.

As a starting point capex/repairs = 15%, management 10%, vacancy 5% and deduct it from the rental income. All of these will be very deal/area specific though. Older homes, less updated, or lower rental rate you might have to pump up repairs and capex to 20%. Management fluctuates on area and company, remember, you get what you pay for here. Vacancy, ~8% is anticipating missing 1 month of rent a year, so 5% is about 2 weeks a year.

Needed? No way. A good idea? Maybe.

The LLC is just there to keep a liability from one property from spreading into others. Keep good insurance, do business on the up and up, and I wouldn't be worried about it.

It was the same company. I believe the girl called from a Massachusetts number.

Funny story, I actually got a call the next day after I spoke with the rep and said I would consider it. The perspective tenant called like 4 times in an hour and left 2 voicemails, so I was a bit turned off at the persistence. I called her back later than day, and she was going to come by in 30 minutes. 10 minutes later she called back to say her husband fell and she had to go to the hospital and she couldnt meet until the the next day, and right before she hung up she asked how many bathrooms it had, which I thought was strange to ask as your husband was in the hospital. Next day she canceled on me, said she found a place with 2 bathrooms. Typical landlord struggles. 

When I spoke with the rep, it seems like they look in the same zip codes as the tenant was in previously.  Not sure what it is for you, but for me is 53212, which can be realllly diverse since it runs from brewers hill and riverwest all the way up to harambe and the capital drive area. So keep that in mind. Could help you figure out what kind of tenant you are getting.