All Forum Posts by: Derrick Carpenter

@Brent Coombs thanks for hanging in there with me.

I think I may not be explaining this well.  

Purchase price: $40K (cash purchase)

Rehab cost: $30K (fund out of cash)

ARV: $85K

Once the rehab is done and is all rented, I will do a cash out refi and take a loan on the property of $49K.  This loan will pay back $49K of the $70K i put in to purchase and rehab the property.  

At that point, the property would be on a 15 year mortgage and I would still have $21K of initial money and $3.5K of closing costs in the property.  The property would cash flow $37 per month with all expenses accounted for.  Additionally, I am going to personally manage the property, so the $85/month expense will not truly be going out.  I just like to factor it in incase I want to hire a property manager later on.  Furthermore, if i were to put the mortgage on 30 yr, it would take the monthly cash flow to $114/month.

thanks for the review.

dc

@Brent Coombs good questions.  Some background as to my plan is that I am contemplating me purchasing the property for cash and doing the rehab in cash.  The analysis I am showing here is after the fact when I get the rehab done and renters in place and me refinancing it and pulling out some equity.  That is why you see the cash I need being $24.5K and my loan being $49K. If you add those together you get $73.5K needed to do the purchase and rehab.  

In the end the ARV of the house would be around $85K and I would have $24.5K in the property, with equity of about 29%. I would take the other $49K I pull out of the property do another deal.

Thoughts?

dc

Hello and welcome.  I think you need to factor in some capex up front to fix up any thing to ensure it can be rented, but also calculate about 10% of rents to go to paying for future capex expenses as well.  (HVAC, windows, etc)

Good luck.

'@Brent Coombs sorry didn't copy you back correctly above.

Thanks at @BrentCoombs   I reposted and this one should work

Here is a deal I am looking at. Would allow me to fully rehab and have some equity in the property prior to renting. I have it on a 15 yr mortgage as I am looking for the equity build and not cash flow. Let me know if you would go with this. Please see the link.

Opportunity

Thanks

Derrick

Here is a deal I am looking at.  Would allow me to fully rehab and have some equity in the property prior to renting.  I have it on a 15 yr mortgage as I am looking for the equity build and not cash flow.  Let me know if you would go with this.  Please see the link.

Opportunity

Thanks Derrick

Hi Chris,

Welcome to the site.  Great place to learn and bounce ideas off people.  I am still learning myself.  Get in there and have some fun.

dc

Welcome Shane.  I have a couple properties as well.  Good site to bounce ideas off of and get good advice.  Great content too.

@Account Closed In your suggestion, I am assuming that when buying for cash, the theory is that I should purchase a home at greater than 20% below market value, so then when you get a loan you have enough equity still in the home that the bank gives a loan?  Assuming yes, I would then be able to get all of my money out of it and purchase the next house and do the same thing again.

thanks.

Derrick

Hello everyone,

I have a rental property in Bentonville, AR.  This home is a A property in an A neighborhood and was my personal residence prior to moving from Bentonville 4 years ago.  I rented the property to a mid-level executive at WalMart headquarters 4 years ago and they have paid like clockwork every month.  The home is about 8 years old, so the up keep is low and a hail storm just allowed me to put a brand new roof on it at no cost.  

Currently I rent the house out for $1,800 per month.  With a 15 year mortgage on the home, I am still able to get about $150 of cash flow per month out of this house.  The renters are paying off the mortgage roughly $8K per year for me based on a 4 year run rate.  The house is worth roughly $240K and I owe roughly $135K on the property.

While this has been a good rental property for me to learn on and it has shown me the value of a class A property, I am not sure this type of property would be one I would purchase today to add to my portfolio.  So, the question is, would you keep this house or sell it and get the equity out to go get more cash flow properties?

Is there anyone out there that has made this area of the market their niche and could discuss with me a plan for keeping this property and potentially getting more like it.

All thoughts welcome.

Derrick