All Forum Posts by: Scott Skinger

It's all about the cash flow and you don't have enough info here to really provide good feedback. Roughly your gross income is $48K and expenses are probably going to be at least $25K. What about R&M, Capex, etc.? Make sure your consider all opex and then create a capex schedule that will give you a rough idea of remaining life of capex and what their replacement costs will be. At 400K with financing your numbers are getting skinny quick. Without really looking close at numbers I'm guessing you need to be at 350K PP or below to make this cash flow and worth your time.

@Carlos Matos The 50% rule is just that, a "rule of thumb", yes it applies in the Chicago market (or any market), it much more building specific. To be clear, you might use it to do a very quick front end analysis to make a yes/no decision on whether to look at a building further. This does not mean that your expenses will be 50%...you need to underwrite actual or quoted expenses to get to as close to a real figure as you possibly can. Otherwise, you are not underwriting conservatively/smartly and you will have a losing investment on your hand, especially in this tight market.

The 70% rule? Not sure what that even is.

@Guillaume Fortina As @Brie Schmidt points out, you will very hard pressed to find a buy/hold investment in the neighborhood that you mentioned that even cash flows (at all) right now, assuming you are using debt. It seems that most of the buildings in the decent Chicago neighborhoods are either heavy construction/repurpose plays or appreciation plays.

@Andrew Johnson Thank you! I appreciate the data point.

@Tony Castronovo Sorry, maybe I hijacked your post a bit! 

@Matt H. I reread your post again. I'm understanding it but I also realize that I have a lot to figure out and understand regarding financing and contextualizing to my situation. Some of this I'm sure just comes with experience and lots of conversations. However, I was wondering if you have recommendations for books or sites that offer basic to intermediate information for those of us starting out and really trying to establish a good base of knowledge. Thanks again!

@Matt H. Awesome info. Thanks SO much for the detailed response, very, very helpful.

@Andrew Johnson "don't underestimate the costs of inspections and appraisals for 45 units" Any chance you can share some thoughts, estimates or rules of thumb? This is one area that I'm trying to get a better understanding of costs for my underwriting.

@Patrick Charles This post is a good start https://www.biggerpockets.com/renewsblog/2011/11/09/gross-rent-multiplier-%E2%80%93-techniques-to-speed-up-your-decision-making-part-ii/

@Sam Grooms Thanks, very helpful. @Matt H. thanks for sharing...if you have the time and are able, can you add some context to your last 3 loans? As a new investor, I'm reading and understanding the words...but I'm not really understanding the "why" behind each of these loans. Why did a 3/1 hybrid arm make sense in loan vs. a 5/1 hybrid in loan 2? Was the deal different and the better terms just weren't available for deal 1? What is a float? COFI? Etc.

I get that you might have time to provide "all" of the answers but the more you can elaborate the more helpful your answer will be. Thanks in advance for any detail you can provide.

@Todd Dexheimer When you say "2 tenants to be your caretakers", can you expand a little bit on their role(s) are? What would you expect of the caretakers vs. the PM? 

Thanks as always!