All Forum Posts by: Alex Cotter

Dear Bigger Pockets,

There is a 2 acre lot that is legally divisible to 2 1 acre lots in Pocantico Hills, NY. Price is $550K, or $275K per acre. Houses 2500sf 3/2 or 4/3 in good condition sell for 1.2-1.5M respectively. 

I would guarantee 50% of the transaction. Please let me know if you are interested.

If you are from the Tarrytown, Briarcliff Manor, Sleepy Hollow or Westchester area, then I don't need to give you the sales pitch. Looking for partners. Please reach out to me if you are interested in talking.

Alex

I will be there. Thank you for organizing.

Alex

Thank you everyone.

What a terrific community. I keep asking and asking...and you all keep giving and giving your advice. I hope to pay it forward sometime soon.

I am tentatively planning on a visit to the area to network with others in the business.  If the property is still available, I would visit. Its not a financial decision, rather I am constrained by my own busy schedule in my regular career.

 The seller is saying that he has a lawyer that can cut taxes by 20-60% and has never lost a deal. I wonder if the taxes are high based on higher valuation of the prop by the taxing dept and might have a good basis for grieving the taxes at the new low purchase price.

 Zoran,

I recently updated some numbers based on a conversation with the seller. I was hoping you might weigh in. I am having tons of nerves in pulling the trigger or passing. It does not conform to the 2% rule, however there is no deferred CAPEX in the deal...so there is some comfort. Perhaps in year 3 when CAPEX could become an issue and 50% of the 2% might start applying...I might be good based on appreciation in rent.

Also, the comps could be better than I originally thought. Seller is saying up to $140K versus the 85 I would be paying...which means I would have net cash out when I refinance.

Looking for some second opinions.

Also, you are active in Cleveland?

In case you all wanted an update, I talked with the seller and mentioned that the deal would not make sense for me unless the price was in the $60K range (putting out feelers). His response was that my estimates were off. 

Cleveland Heights:

Price: 85,000 (comps $100-105K)

Rent: 14,100 --> now 15,600

Annual Taxes: 4,000 --> now 3,200

Insurance: 500

Management: (Fixed) 950

Maintenance: $800

Vacancy: ~1175 (logic: 2 year leases w/ 1 month gap in between + 1 mo rent fee to Prop Mgmt) -->now $1300

Utilities Water: $1200 paid by owner --> now 0

Utilities other: $0 paid by tenant

------------------------------------

Revenues: 14,100 ---> now 15,600

Expenses: 8,623 --> now 6750

Return: 15600-6750=8850, 8850/85000 = 10.4%. 

Not going to go into the financing math to keep things simple. The comp situation is pretty good. If I refi my cash purchase, my not cash outlay ends up being very low. To me, this deal hinges now on what I would appraise at. 

Eddie - Thanks for the advice. Its tempting to jump in when thinking about, "hey $500 per month in extra income would be really great". In the strategic sense...lower return deals in the initial stages could reduce my compounding into other deals in the future and crush me later.

In a separate topic, I was calculating the effect of a 1% fee on my 401K and found that over 30 years...that equates to 30% lower returns in the end. 

Over 30 years, accepting 6% over 12% (with an A+ opportunity) would lover my retirement returns by 81%...wow. Hmmm, another example of the 80-20 rule maybe?

Thank you everyone.

William - Cleveland, yup the taxes and water are what hurt this deal big time. I live in CT and "A-" neighborhoods are certainly not selling SFH @ $85k, but I keep an open mind.

Steve - Apparently landlords pay water per an RE agent that has been helping me understand the area a bit better (shout out to Isaac Rowe on BP!). The property cash flows, however I can also 2% returns on 4 plex properties within 45 min drive from me...but not turnkey, so I have been procrastinating a bit on my investment research. Also, with some limitations on the # or mortgages I can carry (and new rules about 2 years of landlording before claiming rent as income) it probably makes more sense for me to look at larger investments, bought less frequently.

Elliot -Yes, cash, then refinance. I left out the financing to simplify the details. Can you really put down 20% for a non-owner occupied multi-family? I had the assumption that I would be putting down 30% and getting lowest tier rates in the 5%-5.5% range.

I mentioned above that this is my first RE investment, but I plan on doing several in sequence. The difference between an okay cash flow versus great cash flow on my first 1 or 2 properties has a domino effect on the true compounding of interest in the larger plan over 10 years, so I have to exercise considerable restraint. I think I will pass on this one.

Hello BP,

First deal Single Family through a turnkey rental company. The property is in a A- neighborhood. Let me know your thoughts. I struggle with putting this into perspective with other deals. 

Price: 85,000 (comps 90-95k)

Improvements: $0

Rent: 14,100 (verified)

Annual Taxes: 4,000 

Insurance: 500

Management: (Fixed) 950

Maintenance: $800

Vacancy: ~1175 (logic: 2 year leases w/ 1 month gap in between + 1 mo rent fee to Prop Mgmt)

CapEx: $0 first 2 years

Utilities Water: $1200 paid by owner

Utilities other: $0 paid by tenant

------------------------------------

Revenues: 14,100

Expenses: 8,623

Return: 14100-8623 = 5477, 5477/85000 = 6.5%