All Forum Posts by: Steve L.

To get cap rate is NOI (Net Operating Income) / Purchase Price. But technically it does not have a direct relationship to cashflow.

Cashflow is a function of your downpayment and cost of capital.

As a rule of thumb, a property will not cashflow if the cap rate is less then your loans interest rate.

What stuff sells for has a lot to do with geography and type of building.

In Southern California -
Multifamily - 4-7%
Commercial - 6-8%

Typically speaking, the more desirable areas the lower the cap rate is.

IE: A property in Newport Beach might sell at a cap rate of 4% and a property in Barstow might sell at an 8% cap rate.

From a numbers perspective it seems like a winner:

16 Sq Ft Price
4500 Sq Ftge
$72,000.00 Revenue
$(7,200.00) Vacancy Allowance (10%)
$64,800.00 Gross Revenue
$(900.00) Trash
$(1,500.00) Water
$(3,600.00) CAM
$(10,000.00) Misc
$48,800.00 NOI

$435,000.00 Cost
$(43,500.00) Down Payment
$391,500.00 Loan Amount
$23,490.00 Interest Only (6%)

$25,310.00 Cash Flow

11.22% Cap Rate
58.18% Cash on Cash

I added $10,000 year in miscellaneous expenses and hit it for a 10% vacancy allowance. For simplicity sake, I assumed that the payment is interest only at 6%. With two tenants a 10% vacancy is very easy to achieve, so you need to investigate the leases.

- Where is it? In California a 10+ cap is great, but many other places it is common.
- What is it?
- Do the tenants have leases? You should get copies. Do they have a history of paying on time? Are they really NNN leases?
- If a tenant moves out will a lot of tenant improvements be required to get someone else in?
- Why is the owner selling? Is there something you do not know about?
- Do you have financial statements? The expenses seem a bit low?

Good luck...

I got my RE license, not to sell to clients but because I want to be an investor. Like Summerhomes said, in Inland Empire with the SafeMLS it is very difficult to share usernames and get access to the MLS without being an agent.

On all the properties I do disclose that a licensed agent owns the property.

Good luck, we buy a lot of properties in Fontana, Ontario, Rancho Cucamonga and the surrounding cities. It is an interesting market right now.

For the deals we do, we usually email the agent a copy of the EMD deposit check. So we do not deliver the actual check until the offers is accepted.

I think the bigger problem with the strategy you mentioned is you will have a hard time changing the name on the purchase contract once they accept your offer. So if a deal you offer in your name gets accepted and you "find a buyer", how will they get on title?

This is a big problem for us, as most of the rehabs we buy we want to resell before 90 days. If you are on title for longer then 90 days it typically is not a problem for a rehab.

I had heard some banks did not enforce this rule. But we have not had any success so far.

Most of the homes sold at REDC as "Subject to Sellers Approval." Basically meaning the bank can accept or reject your offer.

Did you hear back yet?

Do you have stocks, 401k? Usually if you include that in your package it appeases banks. The letters I have received from hard money lenders I usually do not include as it draws questions.

As per Houses:

We are able to buy properties in Inland Empire California that would cash flow. REOs that need work. We are flipping right now, but most of the properties we are buying would cash flow as rentals. You are not going to find properties for cashflow in Orange County or most parts of San Fernando Valley though. But you probably don't need to go as far as San Bernardino either.

I think California is still correcting, so we are not ready to pursue the buy and hold model yet...

We have been staging the houses we renovate. Basically, kitchen table, family room furniture, basic bathroom stuff and a master bedroom.

Our landscaper called us Saturday and said the kitchen table and master bedroom mattress was missing. So sure enough we got robbed.

The neighborhood is not that bad. But this has made us debate is staging worth it? The value of the stuff taken was not huge, but it adds up.

What do you guys do? We are questioning if we should stage at all? Should we put up real cameras? Fake Cameras? Will that turn off buyers?

What about MLS access and checking real comps on recent sales and current listings?

I use a mix of Zillow, MLS, and a couple others. For San Bernardino county (California) if you take 90% of the lowest value range on Zillow it seems to be close.