All Forum Posts by: Dustin P.
Dustin P. has started 17 posts and replied 523 times.
Post: Looking for Feedback
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
Hey Phillip, I just took a look. Here is some feedback from my end.
ARV: Nothing in this area has gone for over $270k without a pool. So if someone purchases for $285k they are under water pretty much right off the bat. If it were me I would want some equity in the deal.
Cash Flow: Assuming the property appraised for $270k and you put 20% down, for a loan amount of $216k, you're PI is about $1159 a month. Add in $42 a month for HOA, $153 a month for property taxes, $100 a month for insurance and you're at $1454. Add in repairs, CapEx (Should be minimal since it's newer but still at least 3%), vacancy and property management, and you aren't cash flowing
I would expect an investor to want to purchase this in the low 200s
Post: Agent Struggles - Friends Using Other Agents - Advice?
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
Hey @Jesse Smith I understand your frustration. I'll echo a couple of people here
1) Being part time you will not be very successful. I know everyone knows a friend's half brother's second cousin who is a part time agent and does really well, but in general, you need to put time in to build a successful book of business. After you've put the years in building your network you may not need to spend the 60 hours a week, but right now you do
2) Stop giving advice that you aren't getting paid for. This is just disrespectful from your friends to even ask. They chose an agent that they feel will be better for them, whether it was a lower commission or more expertise, so they need to direct all questions towards that agent. You aren't being mean or rude, you are valuing your time.
3) Perception is everything. Along with your current marketing, maybe post some success stories from your own investments. This could get people excited and make them realize you are doing this as a career and that you know what you are doing
Good luck!
Post: Whole-tail flip on a mobile home
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
I love these wholetail types of deals. Quick get in and out and low risk. Nice job!
Post: Which city has the greatest shortage of CONTRACTORS?
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
I'd say quality contractors and especially subs are hard to find in Phoenix right now. Demand is definitely high
Post: General Contractor for Rehabs
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
I would educate yourself on material and labor costs by calling / interviewing subs first. If you don't know what things cost you will get played hard
Post: Rent Based More on Square Footage or Bedrooms
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
@Matt Dickens Nothing will ever be as viable as the MLS, do you have a realtor who you can work with on it?
Post: Analyzing homes on the market, numbers never work.
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
Originally posted by @Dan H.:
Originally posted by @Costin I.:
I’m trying to understand how this can be considered a good investment, and not a speculation on continued price appreciation.
That “120K instant equity” is a bird on the fence, yet to materialize. And is only 60K, because you paid 60K to get it.
Usually, condominiums have HOA, but maybe yours doesn't. You don't have anything factored for PM and vacancy (usually 8% property management and 8% for vacancy), nor anything for capital expenses and maintenance repairs, nor make ready. Depending on what number you would use here, you'd end up with a $500-$800 monthly negative cash flow.
So, your 60K investment brings you a negative (!) $2,400 - $9,600 annual return. That is pretty much guaranteed. Any longer vacancy, tax increases, rental cap will only make numbers worse. So, what is the play here? A bet on SF market continuous rise?
you are both correct. Her cash flow numbers are way off. Even with the low vacancy rates of San Francisco there is also maintenance/cap expense, vacancy (even low it has to be included), misc, and even though she currently self PM the PM cost should be factored in. She is definitely loosing a lot more than $190/month.
However, the $120k has significantly already been realized. She realized a large percentage of it upon her refi. For example at 80% LTV she has already realized $96k (80% of $120k). That is money she already has in her pocket. In Ca there are virtually zero tax increases. San Francisco/San Jose vacancy rates are some of the lowest in the nation and when factoring in homes on the market is nominally 3% (but i would use higher). I suspect her HOA is included in her PITI such that the PITI includes full escrow (taxes, insurance, HOA).
$96k of profit already achieved can absorb a lot of negative cash flow but historically San Francisco rents go up at an incredible rate and there is incredible market appreciation. That negative cash flow is likely to decrease every year and soon should have better cash flow than the Midwest purchase that was purchased for its cash flow. You may think this is speculation but its track record in this area is as sure as cash flow projections. If you believe cash flow projections do not dive then I invite you to look at the rent/vacancy of Detroit or Las Vegas during the Great Recession.
Her purchase has already produced returns and is very likely to produce cash flow soon.
I would purchase that RE in a moment due to the initial return achieved from the refi. There is no looking past that she got $96k in her pocket already on a $60k investment. It would take a lot of years of cash flow on a Midwest unit to achieve $96k.
Great post Dan. I agree also that I would take that deal in a heart beat.
If you can't float a little negative cash flow every month then sure, don't do it. But to everyone else that deal is a slam dunk.
Post: Analyzing homes on the market, numbers never work.
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
Originally posted by @Diane G.:
@Costin I.
I bought it for $560K with $60K down.....2 weeks after close, it appraised at $680K and I refinanced it down to 4% 30 yr fixed....
Current PITI is $2990, so I am losing $190/month.... but I gained an overnight of $120K in equity...that is if I want to be conservative and NOT use Zillow estimate....
It's going to be tough to get through to the cash flow only / Appreciation does not exist / Midwest crowd
But to me, this is a slam dunk deal. $120k in equity is significant, and it sounds like you may actually have more than that. Not to mention I'm sure you'll raise the rents by $200 next year if you don't sell right away
Different strokes for different folks I guess
Post: Rehab Budget (basic question)
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
Most hard money lenders in Phoenix will lend 85% purchase price and 85% of rehab cost. So the extra 15% comes either from cash or a line of credit typically
Post: What is the cheapest house you ve ever bought?
- Realtor
- Tempe, AZ
- Posts 541
- Votes 442
I just bought one for $128k for only about $2k out of pocket on Friday, once the tenant is out in December I plan on cleaning it up and selling for $175k
Cheapest actual dollar amount house though was $36k. Closed it, wholesaled it for $65k, investor is going to sell for $170k after a renovation