All Forum Posts by: Chris Calabrese

I have just come across this too while looking at FM purchases. The blank contract says you can't convey for "GREATER THAN $______ FOR A PERIOD OF ___ MONTHS". Do they automatically use the purchase price, or could you change it to the ARV of the property?

Same question regarding the 2nd part, which puts a maximum mortgage restriction - could this stop you from getting appropriate rehab financing?

I just came across this thread for the first time, and had a thought that's a little difficult to explain. Maybe I'm stating the obvious, but instead of trying to prove or disprove the 50% rule, I'm trying to rationalize why it would work so well.

It seems that natural market forces will drive the expense ratio of a property to some sort of "equilibrium" that would be the same regardless of the region or type of property. As investors, we value properties based on their income, however from an economic standpoint, the rents in a region are based on what income it takes to support the costs of operating the building. Assuming that reasonable investors are looking for similar returns on investment properties, the expected return sets the expense ratio. So, if most investors were willing to accept a 1% return, market forces would drive the rents lower, and it could be the 60% rule. Or if investors or apartment owners would only accept a 25+% return, rents would be higher and it could be the 40% rule.

I have some data to contribute (a big sample of 1). 1 br/1 ba/600 sf condo outside DC. Rents for $1200/mo.

Expenses:
Taxes - $200
Condo Fee - $218 (inc. insurance)
Vacancy - $60 (@ 5%)
HMS Warranty - $35
Total = $513/month

The warranty covers all appliances (I use it about once a year at $100/deductible), and I can turn the place over for a new tenant for about $250. Adding that in, I get $542/month or about 45%.

My point is that if the taxes or condo fee were lower, than the rent would be lower by natural market forces. And if they were higher and the local market couldn't support higher rent, than people wouldn't own them as investments anyway.

Just 2 cents from a beginning investor.

David, I'll be doing the same thing here in Charleston in the next couple of weeks. I hope I make some good contacts too.

-Chris

Thanks Joel!

I'm actually out looking at properties this week, so I don't have a deal yet. The numbers were just ranges to give an idea of the scope of the projects I'm looking at.

I've done a lot of research on flipping already, and know a lot of people in the real estate biz, so my knowledge-to-experience ratio is off the charts. Unfortunately, I suspect I'll learn more thru experience than anything else!

Once I narrow down, I'll post some numbers for analysis.

So I'm looking to do my first flip, but haven't narrowed down to a specific property yet. I have a couple of friends and family willing to loan some money assuming I can find a good deal, and I have about 20k to put in on my own. I was considering offering 2 options:

1) Straight loan earning 10-12%, interest payable on property sale

2) Loan earning 5-6% plus they get 10-20% of net profit on the flip

I'm looking at properties that I can get done for <$150k and sell for <200k. Anyone think this makes sense?

Also, does anyone have a private loan "template" that would be valid in South Carolina, or should I just consult a local attorney?

-Chris

I ask mainly because I'm a do-it-yourselfer (not home repair, but in all areas of life), so I like to buy/sell/rent my homes on my own. In my limited experience, this has never been that difficult, so using realtors seems like a waste of money. On the other hand, to do flips and get public exposure, you really need to be on MLS.

Hi, I'm just trying to get started in the Charleston/Coastal Carolina area. I'm technically new to the business, but own 2 homes (1 residence, 1 rental) and my wife is a successful, albeit relatively inexperienced, realtor. I've also spent a lot of time on research and have some limited development experience through my previous job as a country club manager.

I'm most interested in foreclosures, flips, and picking up some multi-family rentals along the way. I'd like to find properties that could turn a profit as a flip, but be able to support a positive cash flow as a rental to keep my options open (who isn't, I guess?). I don't have a lot of cash, but I do have great credit and some friends and relatives willing to invest if the right opportunity comes around.

Since I'm currently unemployed and have the time, I'm taking real estate class, in case I ever find it useful to pick up my license. Curious as to any thoughts on whether this would be helpful/harmful/neither for an investor.

Looking forward to learning, making contacts, and most importantly making money!

-Chris