All Forum Posts by: David C.

@David Krulac - haha good one on the sister, could be right. She hasn't gone back. I think it was seasonal, she got a great deal on the trip and then found out why - it was 'bug season'.

Piles of snow here Dave, but today our special is on: black ice!! kids are home AGAIN today!

@Duncan Taylor I think Mr. Krulac is just telling us about a magical place that exists somewhere, if you were lucky enough to be born there. I don't think he's advocating we move and renounce citizenship or anything.

trying to sell some property there @David Krulac ?

My sister went there once, she said there were mosquitos or horseflies as big as small cars, and some truck drove down the beach a few times a day spraying clouds of chemicals to kill them.

I can't get that picture out of my head. I'll pay my taxes :)

Seriously though, how's the healthcare?

All you are missing is @David Campbell trying to obfuscate.

David, if you build 1% of the homes in Dallas, and build a good product, that is something to be proud of.

As for this:"At the end of the day I'm offering a 6-6.5 CAP brand new rental property in one of the fastest growing metros in the US that can be purchased with 5% down and 95% CLTV 30 year fixed interest rate financing at 5%. If I were a newer or part time investor where the most important things to me were high leverage, semi-passivity and hassle-free management, I think I offer a compelling product that I haven't seen anywhere else."

I guess I'm going to ask the others here: a 130,000 property that rents at 1300/month - is that a 6 - 6.5 cap rate? With 50% expenses - that leaves 7,800/130,000 = 6% Is that how we come up with a cap rate?

But can we use 50% of rent when the rent is only 1% of the purchase price? or do we need to say: investment properties should be priced at rent = 2% of the purchase price, so a 130,000 property should rent for 2,600, leaving 1,300 in expenses and in his case: $0/130,000 or a 0.00 cap rate?

@Rick Clatfelter

I'm disappointed that you cannot come up with numbers you believe in enough to post on your website, or to post here. I'm not interested in one-on-one off the record dialog, if you do not believe in your numbers enough to stand up for them publicly, I don't think I should put any faith in them privately.

I'm an SAP Consultant, I charge 115/hr to some clients and 130/hr to others. I compete against people who charge $8/hour from Russia on odesk.com and I compete against Big-6 firms and SAP consultants who charge $400/hour.

There is no one right price - there is more to a purchase than price.

Those are my numbers for my business. Its not very complicated, I sell hours of effort.

You sell investment real estate. There are clearly documented costs: interest, taxes. And then estimated numbers: repairs, vacancy, turnover. There are also estimates for appreciation and inflation.

If you need to use estimates that are very far from accepted norms to make your investments look good, then there is a problem. If you can come up with numbers, you don't need to make the people here agree that they are safe, but they are actually reasonable people - and they will admit that there is some room for debate.

There are advocates of Turn-Key on this site, look for Ali Boone's posts. She thinks anyone who self-manages or renovates has bought themselves and awful, thankless job rather than an investment(that's me putting words in her mouth, sorry Ali).

You'll see the 2% rule here: to buy a reliable cash-flowing property you can't pay more than 50 times the rent. rent = 2% of purchase price.

There are people here who believe that 2% is not achieve-able in any neighborhoods where they want to own properties, there is even some consensus that at 2% you have a pure-cash-flow investment with any appreciation as an added bonus. Properties at 1.5% in a good neighborhood are not frowned upon too harshly.

There's a guy on here who just proudly posted a video of his house he bought for 133,000 that he plans to rent for 1,300, not even a 1% property. Clearly he's using different assumptions, and while he may get some 'reality check' he will probably not be harshly attacked. He's buying for his own portfolio and sharing his experience.

You are trying to sell, to turn-key buyers, who are often inexperienced and desire to stay that way - so the bar is higher for you, the ethics are trickier. When a rehabber buys from a wholesaler, its different, they are both in the business, and they both know that each other are probably trying to work the deal to some extent.

Glossing over easily predicted expenses to promote high rates of return when presenting an investment to an inexperienced customer is harshly frowned upon.

I hope you reconsider and come up with numbers that you are willing to stand by and defend publicly.

@J Scott in his defense, his bad terminology was not posted today... Duncan commented today reviving this slightly old thread. I had mentioned this thread to him and in the other conversation.

@Rick Clatfelter

I hope you will post here when your site has been updated with new sample numbers. Or perhaps details of some of your offerings with your estimated expenses for evaluation by the experienced folks here.

I look forward to seeing your educational materials as well.

@Duncan Taylor

Here's the math I'm thinking of:

10 investors, 1 Million each, buy a $10 Million Building for cash. Rents for $1,000,000 - everyone gets 100,000 - a 10% return.

Same 10 investors, borrow $30 million, own $40 Million Building, rents for $4 Million - But now you have interest expense - 8% of $30,000,000 = 2.4 Million in interest. Net income of 1.6 Million. 10 investors get 160,000 - a 16% return.

Had you taken on an 11th investor instead - you get an 11,000,000 building, but still only 100,000 each?

That's the power of leverage, right? borrow at a lower rate than you can earn, and you profit the difference.

If REIT's don't borrow, don't you lose the massive return multiplier of Real Estate - the low interest rate asset-secured loan?

I know I've left tons out of the math, but what am I missing?

@Steve A.

I'm with @Duncan Taylor on this one, keep doing this as much as you can, and pile up the money - ride it as long as you can.

There will still be investments available when you have the time.

Or maybe you'll pile up 20 million bucks and decide that you don't need investment returns at all. Supposedly that wind-bag Suze Orman does not invest in anything, she figured out she needed a 0% return to have everything she ever wanted - so her appropriate risk level is 'none'.

@Steve A. forget Real Estate, write a book and go on the 'get rich quick' circuit - you are the modern Don Lapre! 'tiny little two line ads' guy!!

http://www.youtube.com/watch?v=mubCkCAEiDQ

They could deliver the returns they advertise at lower sales prices.

Lets assume that this property rents at $1050, at 70k, its a 1.5% house, not great, but maybe it works.

However, if you sold this property for 105,000 instead of 70,000 by doing some creative marketing, then your returns are far greater, and the turn-key buyer better just 'beware' or hope for appreciation to bail them out.

There are so many people like me who see: higher taxes coming, low interest rates, and home prices that still look 'low' compared to the bubble years, that we think RE is a 'no brainer'. If I walk in thinking its a no-brainer, and you propose 105,000 for a home that rents for 1050/month. You do some fast math showing me PITI of only 800/month and tell me I'm making 205/month and my appreciating asset is paying itself off - then you get 105,000 for this property that might have been a good investment at 70,000.

@David Cambell is selling 130,000 homes that rent for 1,300 - a pure 1%. He's wrapping it in a bunch of talk about the house paying itself off, and inflation coming - but at the end of the day - he's selling the 1% rule.