All Forum Posts by: Bill Jacobsen

Based on my calculations, it would be worth about $37,000 if it needed no rehab. As a buy and hold it would be worth about $45,000. Of course this is based on your rent figure and your ARV number.

Good Luck.

Bill

I look for properties that can rent for 1.33% of the cost + rehab.  At a 50% expense ratio that creates an 8% cap rate.  If the property is close to that I will look further into actual expenses.

Second, I look at available funding.  I want a cap rate that is 3 percentage points above my cost of money.  If I can get 4% funding I will settle for a 7% cap property.  At 5% it is my normal 8%. So, in my case, I consider any funding below 5% to be good.

Hope this helps.

Bill

The deal looks too thin to me as a wholesale.  Sorry.

Good Luck.

Bill

Be sure to include all expenses.  Besides, taxes, you have insurance, management, maintenance, capital reserves, and vacancies.  I estimate the total to be $6,300 to $7.780.

Based on your loan rate I would want a cap rate around 7.625.  Based on this it would not be a deal for me at that price.

Good Luck.

Bill

There are a number of ratios or metrics that tell you something about the property.  The first one mentioned was monthly rent to purchase price or cost.  This one tells you little because it only looks at rent and price.  If you assume a 50% expense ratio then a 1% monthly rent corresponds to a 6% cap rate.  obviously, 2% would correspond to a 12% cap rate.  You can see that estimating your expense is important.

If you are paying cash then the cap.rate and appreciation equals your return.  I don't try to estimate future appreciation because I would not be good at it.

Your cash on cash is a function of the property performance and your financing.  It is the same as cap rate if you are using all cash.  Cash on cash can be affected by length of loan, interest rate and whether it is interest only or not.  So you can see that the highest cash on cash is not necessarily investment.

I, personaly, look for 8 cap properties or higher when paying cash.  At a 50% expense ratio that corresponds to a 1.33 monthly rent to price number.  If I am close to that I will go further to estimate expenses.  If I am borrowing money I want 3 percentage points above my cost of money.  For instance, if I can get a 4% loan then I need, at least, a 7 cap property.

I hope that helps.

Good Luck.

Bill

I evaluate all properties assuming that I will pay for property management.  I do this so I am comparing apples to apples with different properties.

Based on rents and cost of property it looks good.

Bill

If you are renting at 1% of cost and have expenses of 50% of rent your cap rate is 6%.  For an all cash purchase your total return is your cap rate + appreciation.  Your selling cost using a realtor is about 7%.  That amount is probably about two years of appreciation

If you are financing you will make a greater % on investment assuming your cost of money is less than your return.  I like my cap rate to be 3 percentage points above my cost of money so I would have to be able to borrow at 3% or lower to buy 6% cap rate property.

Hope that helps.

Bill  

I would think that anything under $170,000 might be a good buy.

Good Luck.

Bill

I would look at the expenses.  It is hard to see expenses under 40% of rents.  You are showing 26% of under market rents.

I would also not want to pay full value based on rents that you raised.  I would only pay about 50% of the value of the increase.

Good luck.

Bill

I looked at it as a pure investment.  I estimated the cap rate of about 5.7%.  The mortgage constant is 5.82% on the 95% loan.  There could be a slight cash flow.

I prefer 3 percentage above my cost of money. I would want 4.125% + 3% as a cap rate.

I know that that may not be possible in your area.

Good Luck.

Bill