All Forum Posts by: Bryant Grimes

Everyone,

The feedback is much appreciated and over and beyond what I expected to receive. I guess I should have added a bit more color around this deal in my original post. The reason I wanted to purchase in an A class neighborhood is I plan on this property being my primary residence at some point in the near future and therefore the added challenge of finding a rental property that made sense from an investment perspective but also one that I would be happy to occupy led me to purchase a property outside of the rules of thumb. I also talked the sellers down from $190k to $175k which really gave me the green light as I knew market was at least at or above $200k and that gave me enough equity to turn around and sell it for a bit of profit if it turned out to be something I didn't want to be involved in. After the inspection, the sellers made approximately ~$8k to $9k in repairs which virtually encompassed any major repairs that needed to be made which should reduce my maintenance costs. I also searched in this market for the better part of 12 months [through realtor on the MLS] and this was 1 of 2 properties (other was section 8 on the outskirts of the highlands area) that actually had rental income which would exceed the cost of the PITI.

@Clay Smith - this reinforces your advice about looking into B and C class neighborhoods which I plan to do now that I have a place to live. Also in regards to continuously putting down 15% - 20%, at the time I was purchasing the property was before I had discovered the BP podcast and was not aware of all of the more creative ways to purchase properties and my only other known alternative at the time was to use an FHA loan on which the mortgage insurance would have diminished the return so much that it wasn't feasible.

Also in regards to your assumptions, I really like that you outlined all of the inputs into your calculations and those are some figures I have not seen before. Are there any threads that really dive into the different assumptions pertaining to different types / ages of property to determine an estimated maintenance cost / accrual for repairs [i.e. something that allocates factors to age of house, roof, HVAC, # of kitchens, # of HVAC systems, etc.] as that would be very helpful for me in the analysis of future dealings. Additionally, as @Michael SeekerThose are some great questions and to be honest I had not considered many of them at all from a mathematical perspective and I appreciate the feedback. I calculated the IRR based on the majority of factors discussed above which appears to be ~20% from a 20 year hold perspective & ~22% from a 10 year hold perspective and ~30% from a 5 year hold perspective which is most likely being driven from purchase under market value. In my situation, would you consider selling after you were ready to move out instead of holding this property and take the cash from the sale and invest in other properties with better metrics? Also, I would greatly appreciate it if you could point me to some ranges in regards to CapEx & maintenance expenses for me to consider based on your experiences of different properties.

Once again I appreciate all of the opinions and feedback.

I am a first time real estate investor and CPA in Louisville, KY and recently purchased a duplex (two unit each 1 bedroom one bath split level property) in the Highlands area which is a relatively high market value area in a prime location. I acquired the property for $175,000 and appraisal came in at $200,000.

Total PITI is $1,066 / month after putting 15% down on the property. It is currently rented for $1,450 / month and the only other fixed expense pertaining to the property is water included in rental price which is ~$100 / month. Prior to purchasing property I was not aware of the additional expenses that should be considered based on various investment rules / gut checks and having completed the purchase I am looking for feedback on the deal and am looking for opinions in regards to if this was a "good" deal or not.

Additional factors to consider is the property appreciation value based on historic sale prices between points in time [i.e. sold in 2004 sold again in 2015] for similar properties in the similar area seems to be a consistent ~4%. Also, the rent for one unit has not been raised in approximately 5 years and the other in over 2 years, therefore I anticipate the rental market value upon tenant departure would be ~$1,600. Further, the area in which the duplex is located has an extremely low turnaround for tenants and by putting a sign in the yard and posting add on craigslist, most are rented within 5 days with landlord pick of multiple potential tenants.

If there is any additional information I would need to include for readers to determine if this was a good deal or not please let me know and I can include. I am interested in continuing to invest in real estate and grow my real estate portfolio and any feedback provided would be greatly appreciated. 

I am a first time real estate investor and CPA in Louisville, KY and recently purchased a duplex (two unit each 1 bedroom one bath split level property) in the Highlands area which is a relatively high market value area in a prime location. I acquired the property for $175,000 and appraisal came in at $200,000. 

Total PITI is $1,066 / month after putting 15% down on the property. It is currently rented for $1,450 / month and the only other fixed expense pertaining to the property is water included in rental price which is ~$100 / month. Prior to purchasing property I was not aware of the additional expenses that should be considered based on various investment rules / gut checks and having completed the purchase I am looking for feedback on the deal and am looking for opinions in regards to if this was a "good" deal or not.

Additional factors to consider is the property appreciation value based on historic sale prices between points in time [i.e. sold in 2004 sold again in 2015] for similar properties in the similar area seems to be a consistent ~4%. Also, the rent for one unit has not been raised in approximately 5 years and the other in over 2 years, therefore I anticipate the rental market value upon tenant departure would be ~$1,600. Further, the area in which the duplex is located has an extremely low turnaround for tenants and by putting a sign in the yard and posting add on craigslist, most are rented within 5 days with landlord pick of multiple potential tenants. 

If there is any additional information I would need to include for readers to determine if this was a good deal or not please let me know and I can include. I am interested in continuing to invest in real estate and grow my real estate portfolio and any feedback provided would be greatly appreciated.