All Forum Posts by: Adam Scheetz

Hey @Bill Goodland, I'm going to send you a message. 

@Marcus Auerbach Thank you for that info. Especially, the flood insurance thing. The last thing I need is the statement of work from the contractor. We will go walk through the property together. If the rehab cost goes up, as I suspect it will, there should still be some room for that.

@Jennifer Petrillo Hopefully, I can do that this weekend. 

Thank you so much to both of you for your input!

Greetings All,

I've been crunching these numbers and running different scenarios to exhaustion. As crazy as the margins are, it still seems like a good buy. Lots of work is needed, but the spread leaves tons of room to accomodate unforseen expenses and still cash flow very well in addition to the equity. I'd love to know if anyone else would feel the same were they in my situtation.

Here are the numbers and Data:

• 1918 Duplex
• 6 Bed/2 Baths
• 2,281 sq.ft
• Banks Asking Price: $99,000
• My Offering Price: $75,000
• Estimated Rehab: $50,000
• Estimated Closing Cost: $3,000
• ARV: $220,000 (Conservative Estimate by multiple local agents)
• Estimated Rent (Conservative): $3,000; (Realistically $3200-3700)
• Verified Property Tax: $7,330/ann; $610/mth
• Verified Vacant Policy Insurance: $219/mth
• Verified Occupied Policy Insurance: $260/mth
• Flood Insurance: +$250/mth (Needs Elevation Cert: $350)
• NJ Landlord Fee: <$25/mth
• 20% Down @ 5% Interest: $715/mth
• CAP-X: 5%
• Repairs and Mx: 5%
• Vacancy: 5%
• Property Management: 8%

Okay, now the talking part. This duplex is in a quiet, clean, coastal town. Very low crime rates (No violent crimes), decent schools, people still walk around and ride their bikes. The neighborhood is middle-income/blue collar. No gang activity. No derelict properties.

I'll show you the results based on the banks asking price and the offer price.

Banks Asking price results:

• Net monthly cash flow: $442
• Year 1 Cash ROI: 7.47%
• Year 1 NOI: $13,884
• IRR: 17.52%
• CAP RATE: 15.43%
• 2% Rule: Actually it's the 3.3% rule.

My Offer Price results:

• Net Monthly Cash Flow: $442
• Year 1 Cash ROI: 7.80%
• Year 1 NOI: $13,844
• IRR: 18.6%
• CAP RATE: 18.51%
• 2% Rule: Actually it's the 4% rule.

Okay, when I first started crunching these numbers and seeing all the positive trends, huge returns, and crazy equity, I started saying what you are right now. "No way, there's something wrong, when things seem to good they usually are." So I started double and triple checking things. I called multiple insurance agencies to get accurate quotes. I ran multiple scenarios at different interest rates, lower rents, higher CAP-X, etc, and the spread still kept looking good. So, after talking at length with multiple real estate agents, insurance agents, and a local investor/general contractor who will be performing the rehab. This property has tons of potential i believe. What do you think?

Here are the numbers and Data:

• 1918 Duplex
• 6 Bed/2 Baths
• 2,281 sq.ft
• Banks Asking Price: $99,000
• My Offering Price: $75,000
• Estimated Rehab: $50,000
• Estimated Closing Cost: $3,000
• ARV: $220,000 (Conservative Estimate by multiple local agents)
• Estimated Rent (Conservative): $3,000; (Realistically $3200-3700)
• Verified Property Tax: $7,330/ann; $610/mth
• Verified Vacant Policy Insurance: $219/mth
• Verified Occupied Policy Insurance: $260/mth
• Flood Insurance: +$250/mth (Needs Elevation Cert: $350)
• NJ Landlord Fee: <$25/mth
• 20% Down @ 5% Interest: $715/mth
• CAP-X: 5%
• Repairs and Mx: 5%
• Vacancy: 5%
• Property Management: 8%

Okay, now the talking part. This duplex is in a quiet, clean, coastal town. Very low crime rates (No violent crimes), decent schools, people still walk around and ride their bikes. The neighborhood is middle-income/blue collar. No gang activity. No derelict properties.

I'll show you the results based on the banks asking price and the offer price.

Banks Asking price results:

• Net monthly cash flow: $442
• Year 1 Cash ROI: 7.47%
• Year 1 NOI: $13,884
• IRR: 17.52%
• CAP RATE: 15.43%
• 2% Rule: Actually it's the 3.3% rule.

My Offer Price results:

• Net Monthly Cash Flow: $442
• Year 1 Cash ROI: 7.80%
• Year 1 NOI: $13,844
• IRR: 18.6%
• CAP RATE: 18.51%
• 2% Rule: Actually it's the 4% rule.

Okay, when I first started crunching these numbers and seeing all the positive trends, huge returns, and crazy equity, I started saying what you are right now. "No way, there's something wrong, when things seem to good they usually are." So I started double and triple checking things. I called multiple insurance agencies to get accurate quotes. I ran multiple scenarios at different interest rates, lower rents, higher CAP-X, etc, and the spread still kept looking good. So, after talking at length with multiple real estate agents, insurance agents, and a local investor/general contractor who will be performing the rehab. This property seems like a great oppetunity.

@Andrei Soroca I'm sending you a message.

@Andrew Postell Thanks for confirming my suspicions! I really appreciate all your feedback on these forums.

@Andrew Postell Investment property. 

@Andrew Postell You mentioned DTI when looking for financing. As a military member I'm used to applying for loans with my BAH included. Of course I also had a mortgage/rent to eat some of that up. In my current situation, I don't have my BAH (which sucks because it's $3,300/mth) because I am living on base housing. This lowers my reportable income when applying for a loan but also lowers my debt as well because I have no rent or utilities either.

That being said, having less 'Income' because of no BAH but also less 'Expense' seems to help my DTI ratio a bit, would a lender take that into account and find it favorable or not? Essentially, my situation now is my military income has very little expense coming out. If I look at a more expensive property, say $400k but still cash flows north of the 1% rule. Would I be more or less likely to get it, all other aspects being equally favorable?

@Irina Belkofer I'm going to look at it tomorrow. Waiting to get confirmed numbers and rates from a couple insurance companies. At a minimum this might be more lucrative as a B&H without a refi. When I get all the numbers I'll reevaluate and post here for everyone. Thanks so much for your response!

@Mark Hughes That's what I'm talking about! Spot on example!!! I'm in acquisition mode which is why I set my per/door threshold low at $100. It's just a matter of finding the right amount to refi and not lose my shirt. I'm more concerned at the moment with bank rolling multiple and sequential properties. After a few, I'll shift my methodology a bit. Thank you so much for your spot on example. I'd love to talk to you about your process and experience with the Quad deal.