All Forum Posts by: Chris Vail

@Jeiby V. 

I am going to echo the folks that have already responded, put your money towards an asset, not towards a teacher.  There are thousands of teachers on this site that can help you out.

I almost pulled the trigger on a "guru" type deal a couple of months ago but I am really glad I didn't.  It sounds great, having someone walk you though the entire process from start to finish (or at least thats what they say), but in reality you will learn so much more by doing it on your own with the help of free teachers.  After all you have already spent 10,000 on courses and information.  Its time to start putting your money into assets and those assets will become teachers that hopefully pay you money instead of the other way around.

@Denayer Burns 

I would make your way over to the "Learn" section of the site lots of great resources there. Start with the Ultimate Beginers Guide which gives you a very good overall picture.  There are so many different roads you can take in real estate investing that there isnt just one answer to your question but the closest generic answer I can think of is the following...  A good deal is where the actual performance of an asset meets your expectations of profitablitiy when you went in to the deal. 

@Polina Goncharova 

Some things to consider: 

This is not cashflow positive unless you are paying for the unit you are living in, I am sure you have considered this but just want to point it out. In reality your Gross rents are 2,615 until you rent that unit out. Your NOI until this happens is $916 per month then minus your Debt service = ($413) in cash flow or your rent for your unit.

I dont see any reserve amount calculated anywhere as far as a rainy day fund is concerned you will want to account for that somewhere.

Other than these it looks like a solid deal, nice job 

@Dennis Lanni I did some reading on Sam last night, some interesting stuff.  It makes sence if you can by low and sell high and have systems in place to not get burned or lose your mind on the journey up you stand tomake a significant profit over time.

Google is fantastic and and "Sam Zeil" was enough to get me pointed in the right direction :)

@Tom V.  the sac crime map is pretty eye opening that you linked thank you for that.

@Anthony Hill 

Some things you will want to consider, is this an investment or a favor to your mother in law?

If this is a favor to your mother in law then you will need to decide what level of favor you are willing to provide.

If this is an investment then you need to not look at this property unless you feel there will be significant appreciation over the years to offset the money you will continue to put into this property to keep it cash flow neutral.

Some things to consider with the investor glasses on and not the family ones:

Gross rents/income: 10,500

Vacancy: (630) generally 6% of Gross rents

Gross operating income: 9,870

Expenses-

PITI: (8604) or (717) x 12 (you might want to break this up into the individual components so you can see what each piece is really costing you to identify potential savings also you want to remove the PI payment out of this as it is not an expense and should be taken into account after you get your Net Operating Income (NOI).

This is the only expense chunkyou list out currently but there are so many others if this is truly an investment:

Property management: (1050) generally this is 10% of Gross Rents and even if you are managing it yourself you need to account for it to see if the deal would stand on its own.

Repairs and Maintenance: without knowing if there is an HoA in your PITI there are bound to be small things that need to be replaced over time, think appliances, fixtures both electrical and plumbing. It may be a freshly remodeled property but you need to set something aside for when the inevitable will happen.

Reserves: (This is for major repairs, think roof, A/C, Electrical panel... Major items, again this is something you need to set as part of your monthly/yearly expense to account for what will happen eventually so you don’t have to come up with 5-7k when you need a new roof 10 years down the road.

Lawn Care: again not sure if this is in your PITI

Trash Removal: see above

Utilities: I am assuming you are having the mother in-law pay all these but would it change if you had a tenant that wasn't family?

Without knowing what all of the items are for cost I will use the 50% rule to ball park

Expenses: (5,250) roughly a year

NOI: 4,620

Debt Service: (6,672)

Cash flow: (2,052) per year or (171) per month. Now this is an overtime figure some years you might not lose any money but other years when a major repair needs to happen you will lose a lot. The 50% rule tries to account for all of the ups and downs so you can better analyze an investment over the long run.

Now if you could swing 100% cash on the deal meaning no mortgage payment you would be looking at a cash flow of 4,620 per year or about 3.55% cash on cash return if the seller covered all closing costs and you only had the 130,000 as the amount you would be out of pocket.

I hope this helps, there are a ton of deal analysis spreadsheets all over the forums, I would recommend finding a couple and rethinking some of the math so you can better understand and screen out properties faster.

FYI on this property my calculations have this property needing to rent at 1,183 per month in order to be cash flow neutral when operating under the 50% rule. Or you would need to purchase the property in the 95k - 97k range in order to be cash flow neutral at 875 per month in rent.

Thank you @Dennis Lanni you got your post in between my follow up post.  Thinking I might grab a map or pdf one and start highlighting and striking out some areas to help narrow my search areas.

Thank you @David Hutson , @Matt R. 

 for the input.

There are a few properties I am watching in that area and will be making a trip down there to drive around either tommorrow or Sunday, and it sounds like I know where I will be eating lunch :).  Figured that that area is close to the med center and close to a major freeway interchange allowing for a quick commute in almost any direction.  I know the further south you go down into Oak park the more challenging it gets when it comes to the property rating.  If what has transpired in Curtis park continues to make its way east then that area could see some really nice appreciation over the coming years.

Congrats Brianna Schmidt that's fantastic news. It's always fulfilling to see a goal such as this materialize into reality. This is on my list of goals, it's a ways down the list somewhere in the 5 year area, but it is there and will be accomplished when the time is right. A new chapter begins, I hope for all the best for you.

@Al 

@Al Williamson undefined, @Dennis Lanni , @Sarah B. , @David Hutson , @Jason Flynn , @Mehran K. 

 tagging some locals in Sacramento and others to get some insight.

Hello BP,

As I continue to learn about REI, I have struggled with the B, C, and War Zone concepts when it comes to neigborhoods. Specificly Sacramento, Ca but also in general. For the Sacramento investors what would you say about the area between highway 50 down to 14th street and highway 99 over to Stockton blvd? Mid town and the fab fourties I believe to be "A" areas. While living in Chico, I lived in some questionable areas but only really knew they were questionable after living there for awhile and having friends say "you live where???". To me it wasnt that bad, rent was cheap and it allowed me to save money. So how does one feel out an area with out living there in order to make a judgment on what level of renter that might want to reside in your investment?

Thank you in advance for your responses.