All Forum Posts by: Dan D.

 Sorry, just one added thought.

My wife an I put less than $8,000 down on this house and "we" made the payments (with no rent) while we lived there of course.  Whether to count that against your return or not, I'm not sure.

But by buying and holding it, it's allowed us to gain a nice amount of wealth where as if I had invested that $8,000 in the stock market, it would now be worth about $14,000.

Originally posted by @Zack Presnell:

When searching for rental property to purchase managed by yourself, what is the maximum travel time to consider before it becomes not worth it. Thanks for the experiences.

 About 5 minutes!  :-)

Seriously, my "one" is close by which is great.  I'm adding a couple more this year, but they are within a 30 minute drive.  My goal of course if to automate as much of my managing as I can.  Paying the plumber $250 is better than me driving 30 minute each way and messing with it for 45 minutes to discover I need to go to the hardware store and then return and fiddle with it some more.

Unless if the wife and I aren't getting along, then I could spend 8-12 hours sweeping the floor in a rental utility room.

Originally posted by @J Scott:

Originally posted by @Dan D.:

I don't disagree with that, but at the same time, since 2008 when the property was worth maybe $230-240k and I owed $185k-190k, I had maybe $40k-$55k equity where now I'm closer to $120-140k.

2008 was the bottom of the market in many places.  2014 is the top of the market according to many people (who knows?).  So, assuming that what happened the past 6 years is representative of what will happen in any random six year period is flawed.

What if you would have purchased that property in 2005?  What was it worth then and now?  Would your numbers look as good?

 If I had purchased it in 2005, it would have gone for about $265k and would not have cash-flowed so not worth it, but that math at that point was pretty easy to see from a buy and hold standpoint.

What is your suggestion in this case?  Respectfully, I'm not sure what your point is regarding buying in 2005.

Congratulations.

I hope to be in a similar spot in a few years. 

Very rewarding (I assume).

Originally posted by @Jerry W.:

@Dan D.  I can't help but wonder how much you paid for the property.  I have no rentals anywhere near your monthly rent.  My local purchase price is between $50K and $110K, and my rent varies from $450 to $800.  I would love to get $1850 per month but the house I would have to buy would not be affordable for me.

 Hi,

I paid $205,000 for it in 2001.  My wife and I lived in it from 2001 to 2008.  (Talk about no cash flow).  We moved in 2008 to a foreclosed house that we rehabbed.  We started renting it out at about $1600 a month then.  The value of the house now is probably in the $280-$300k range now depending on how optimistic you want to be.

Calculating ROI on it seems rather subjective because we bought it for like 3% down back then and it was new construction which limits my expenses some. Plus we put a new roof on in 2006 after a hail storm which insurance took most of the cost of.

That's why I'm curious what others really run for expenses.

I run two calculations on my spreadsheets.   One is using the 50% rule which makes a lot of these investments at a higher rent point seem like they will never cash flow.  Then I run another equation what I call cash flow after hard costs.  Which is rent minus the total of my mortgage payment as well as inflation adjusted taxes and insurance (assuming they will go up).  That leaves me a remaining bucket for "cash flow and repairs".

Using the 50% number it still appears I'm losing about a grand a year cash flow wise.

Using the "hard costs and repairs", my best case is I make $6,000 a year on it.  ($500 per month per door).  If I had to average it out over the 7 years so far, I'm guessing I'm averaging closer to $350 per month than $150 per month cash flow.

So looking at things that way, the response is as people have said.

"You're not paying yourself for prop management."

"You have cap ex expenses coming"

I don't disagree with that, but at the same time, since 2008 when the property was worth maybe $230-240k and I owed $185k-190k, I had maybe $40k-$55k equity where now I'm closer to $120-140k.

I guess my point is, that expenses can vary, and a big expense can really mess things up, but I think sometimes it does a disservice because it prevents people from executing a decent deal which could help them build some longer term wealth.

How does one calculate an ROI in a case like this?

I get the point about needing to figure in 10% for prop management. But for the few calls I get, I will gladly call the plumber and repairman for $185 per month. I just got my second rental which I will self manage as well. When I get to four or five I will either quit my job to manage them "full time" or hire it out.

I've been renting the unit since 2008, so it's been more than 2 years, but the most expense I had was after a not-so-great tenant, but most of the repairs came out of the deductible.  The carpet needed to be replaced which I paid for, but total bill wasn't more than a couple grand.

Good points, J.

I do the property management myself only because it's maybe 4 calls a year on a busy year.  Last time I showed the property, I had one showing for 90 minutes and got my current tenants.  The calls I forward to the plumber or in the case of the Washer to Lowes for new washer and installation.

No turnover in 2014.  In 2013, the tenant left the property cleaner than when she moved in.  I still did some painting and patch on a few spots.  About two hours worth, but that was 2013.

What amount would you budget for a SFH of average finishes (2,000 sq ft home) for Cap Ex a year?

I have a single family rental right now.

Vacancy adjusted, I bring in $21,000 a year in rent.

My annual expenses are:

Property tax: $3200

Insurance $900

Washing machine $500

Plumbing repair $250

Irrigation turn on and turn off (I do myself, but otherwise it would be about $150.

Total $5,000

So I started trying to track down the family members and I found a grand daughter via Facebook who gave me her dads name who is also on Facebook. Going to see if I can work out some sort of agreement to purchase prior to it becoming a tax forfeit.