All Forum Posts by: Brendan Miller

@Melanie Johnston I saw this recently as well, great news for Mesa. Datacenters don't really add a lot of permanent jobs though (I think the article said only 100 full time jobs for the $800M project), however it'll add a lot of construction jobs and help develop Mesa further. I live in Gilbert and was excited to see this. Arizona is becoming a big attraction for tech companies!

@Robert Thum I'd definitely make sure that the numbers still work if you're planning to hold it as a rental. I've bought several properties this way that have worked out really well for me in the long term. I would look at your worst case scenarios and see if that's a situation that'll still work for you (i.e. if home prices drop 20%, etc). The nice thing is that during most down periods in real estate, rents tend to appreciate rather than drop, so you should still be able to increase rents over that time, but there may be a scenario where you're subsidizing the property a bit if your rents don't fully cover your PITI and expenses, and you'll need to be comfortable with that if you move forward. The advantages of this approach is that you can get in with a very low down payment, lock in a great interest rate, and potentially exclude capital gains if you choose to sell the property within 5 yrs of owning it, if you live there for at least 2 of those 5 years.

@George C. I mostly focus on CoC. If the deal meets the CoC criteria that I want, then it'll meet my IRR target as well. I typically shoot for an 8% CoC for the markets that I am in which is probably considered an OK deal by some investors in other markets

@George C. what purchase price would make it a good deal for you? That's what I normally do, I first run numbers based on the list price and then I adjust list price down until it meets the CoC that I'm looking for

@Josiah Guyer typically appliances are always the landlord's responsibility but I believe it can vary by state, but I have heard of scenarios where landlords push those responsibilities to the tenants. I'd definitely recommend raising rents to market if you can.

@Christopher Bannister I've developed quick indicators for myself to help screen deals quicker, rather than running full numbers on each deal I look at. I am mainly looking at MLS deals, and have mostly been looking at small multifamily properties. I use Gross Rent Multipliers to narrow down my deals. I'm mainly looking for a GRM below 10, so if it meets that criteria and I like the property and location then I'll run full numbers using the BiggerPockets rental calculator. I think the 1% rule is a pretty similar metric, but the 1% rule would be an 8.3 GRM which is hard to come by in my markets. I will recommend that you get in the habit of running full numbers on any property you find until you get comfortable with crunching the numbers. The more deals you underwrite, the more experience you'll have at knowing what a good deal is

@Alexander Davis, I personally don't think that'll be an issue. Mainly because if there are people that can't pay their mortgages, then most will be able to sell now for more than they owe on the loan since the market has been crazy the past couple years. I think it's a much different scenario than 2008 where a lot of people were underwater on their homes. I would have to imagine that prices will correct at some point over the next couple years, since that's how real estate cycles work, but I wouldn't let that delay you from getting started, and I don't think it'll be a 50% reduction in real estate values. People have been concerned about this exact fear since 2016, and those that were too afraid of the forthcoming 'market crash' missed out on one of the best 5 year streaks of real estate appreciation in history. I remember back in 2018 when I bought my current primary residence, I thought to myself 'wow, this is a crappy time to be buying' because I thought I was overpaying at the time, but I told myself I could always hold onto longer if needed. That property that I thought I was overpaying for in 2018 has now appreciated 60% since then! Focus on the deal, if the numbers make sense then jump on it, but don't just buy a property so that you can call yourself a real estate investor.

@Sam Mathew congrats on your progress so far, I'm in a similar situation where I recently sold a rental and am looking to trade up. I'd probably say to stick with Door #1 or #2. Personally, I'm looking for small MFH in lieu of SFH. Door #3 would make me a bit nervous with COVID, I think now wouldn't be a great time to jump into commercial office space (this is just my opinion) since a lot of employers are transitioning to remote work, but it would depend on the size of office space you're looking to buy.

@George C. a few questions/comments:

1) How confident are you with the $3,600 rent? Are these the current/actual rents? If you don't get this, then this could blow up your deal

2) Is this a SFH or MFH? I see you are accounting for $68 for Water/Sewer which would likely mean MFH. How many units?

3) I would make sure your taxes are accurate. They are high, but some states are. I normally try to use a county property tax calculator based on the new purchase price if your county offers one.

4) I think the vacancy and PM are heavily market dependent. For PM of 8%, does this include tenant screening, marketing, commissions, etc?

5) Maintenance & CapEx of 5% each, heavily dependent on the age of the home. If this is a newer home, I'd say you're good. If this is an older home, it may be too low.

@Jane V Yunger, I think it varies a bit by state depending on laws, but typically normal wear and tear means scuffed walls, touch up painting, wear down of carpet due to foot traffic, etc. You didn't mention how much money we're talking about, but I would say you wouldn't be completely out of question to withhold deposit for the floor issue and water damage, especially if it's a large cost. I think the water damage may a bit harder to prove than the floor damage though. Hopefully you did a walk through inspection with them and documented the condition of these areas before they moved in. If you did, then it'll be tough for them to argue with.