All Forum Posts by: Dustin Heiner

Hi @Jennifer Bowen!   Glad you are at BP!

There are many more advantages to rental properties than just the cash flow every month. I have seen 5 big ways rental properties make you money.  To answer your question about stocks and the rate of return, see this example below.

1. NET PROFIT VALUATION

Step 1 – Calculate gross rents, both yearly and monthly.
Step 2 – Add up in total all variable expenses, both yearly and monthly.
Step 3 – Add up in total yearly mortgage payments.
Step 4 – Deduct variable expenses and mortgage payments from your gross rents.
Step 5 – Take your net figure and divide it by your down payment. This will give you a percentage figure that will give you a rate of return on your invested cash.

Examples:
$ Earned / Down Payment = Return On Investment
$500 / $2,000 = 25% ROI
$4,000 / $2,000 = 200% ROI
$5,000 / $2,000 = 250% ROI

So your down payment is what you use as your basis for the ROI, not the total value of the property. Just like how you buy a stock for $15, that is your total $ invested into the investment that comes out of your pocket.

There are 4 other big ways you can make money with Rental Properties.

Send me a PM if you want to know more about it.

Hope it goes well!
Dustin

Hi @Claudia Bonaudo!

How exciting for you finding your first property!

I just bought a property in Houston that was 3200 square feet and the cost of the home inspection was $350.

Obviously yours is an apartment and a third the size of my property so your cost will be different.

What I did and suggest is do your research on inspectors in the area through yelp.com and other websites that point to inspectors in the area. Once you have seen their reviews, you will be able to call the ones that you feel most comfortable with.

Next it's up to you to find the company that you want to work with that you believe will do the best job and at a price you are comfortable with.  The inspection is a very crucial part of your purchase process.  Remember that you get what you pay for. So try to find a company that has a good reputation and reviews if at all possible.

For your real estate business, developing relationships with other companies, inspectors, property managers, and the like will be your key to success.

Real estate is a marathon not a sprint so you need to work on and continue to develop your contacts in the business that will help you succeed.

There are many other relationships that you will need to develop in your business. If you have any more questions, send me a PM and I'll help you out.

I hope it goes well for you,
Dustin

Hi @Anna Smith!

It sounds like you are in a terrific position to build up your rental business. Good for you!

You have a lot of options on how to invest with this money that you have. What I recommend, as well as currently do for my rental business is, buy your next property for cash, and then do a delayed financing on the property once you have a lease.

Delayed financing is basically just like getting conventional financing before you buy the house but is done after you already purchase the house for cash. With delayed financing, you can pull out 75% of the homes appraised value up to 100% of your purchase price including all closing costs.

Hopefully, if you buy right, you will have equity built up in the property already, and you will be able to pull out 100% of your purchase price for the property and have zero dollars in the deal. Also, the rents will cover the financing and put money in your pocket every month.

This is much better than doing conventional financing before you purchase the house because you do not have to put down 20% for the down payment and be out that money. With pulling out 100% of the purchase price, you can now use that money to purchase another property and do delayed financing all over again.

I have done this strategy many times and it is fantastic! I love buying a home, getting it rented, pulling ALL my money back out, and still own the property while it brings in cash flow every month and do it all again with another property.

If you have any questions about this process, send me a PM and I'll share more about it with you.

Hope it goes well!
Dustin

Hi @Howard Maidens!

It seems to me that an FHA loan will not let the price go above the appraised value. A quick search came up with: http://www.fha-home-loans.com/appraisal_qualifying...

"You may obtain a FHA mortgage loan up to 98.15% of the property appraisal value."

Not too sure how accurate it is but I'm pretty sure most banks are not comfortable with lending above the appraised value of a home.

Maybe get another appraisal to see if the value is higher by another company.

Hope it goes well,

Dustin

Hi @Daniel Okon!

This sounds like a very good investment for you.  If all your numbers hold up this will be a good cash flow property. 

One thing I would do is over estimate the expenses and under estimate the rents.  The reason why is you want to be ready for the worst case scenario for the property if it were to happen.  

You may not be able to keep tenants in the property at $950 so there may be high turnover. 

The expenses may not be in line either. The insurance may be more than you expect, or even the taxes.  

If you are still making good cash flow after you run your numbers with the worst case scenario, I'd say go with it!

Hope it goes well,

Dustin

@Blake Van Ness,

Hi Blake!
Oh man I know what you mean. There are so many more baby boomers coming that will need assisted living and senior care. I have actually been toying with the idea of doing the same thing.

What you are actually talking about is starting a business and not necessarily just real estate. Bigger pockets is all about real estate which part of your question relates to, but the business aspect of a senior living facility has much more to do with starting and running a business.

I personally believe that all types of passive income are fantastic ways to help you quit your job and starting a business is definitely one of them as long as you get employees to run the business. I have a close friend whose dad owns an assisted living business here in Fresno California.

So basically what he did was by a large house, about five or six rooms, added more rooms to it by splitting up the living room, adding a section in the back, etc. Then he proceeded to hire employees that would live there 24 hours a day and manage the assisted living facility for him.

So he bought the property and then retrofitted it to be an assisted living facility. The hard part is all the regulations and hoops you have to jump through in order to create the assisted living business. It's not terribly hard to do so but there are many steps.

Your question about raising money may not be necessary depending on how much working capital you have to start with. You can probably find a 4- bedroom house with the ability to add more rooms to it for $250,000 or less and you can get a FHA mortgage on it where you would put 3.5% down.

So you have the property and now you need to make the property pass inspections for the assisted living permit/license that you need in order to operate the business. Depending on how much there is needing for repairs.

For the business aspect of the property, you need to make sure that you have enough operating capital to make sure that your business stays afloat until it becomes profitable by getting more tenants in the.re.

So I would say start looking into what it takes to make a property into senior living facility and once you have a good understanding of what it takes to make a property a senior living facility, you can then run the numbers on any property that you find to see if it would actually make you money. I do know that there is a lot of money in facilities like this. Tenants pay anywhere from $2000-$8000 a month to live in a place like this.

If you want to raise money, being that you are new and have no track record, I believe it would be very hard to find somebody that would lend you money on a business you have never done. I do think you can go it alone and do it all yourself.

I hope it goes well for you!
Dustin

Hi @Blake Van Ness!  Glad to see you here!

If you need any help with anything, I'd love to help.

Take care,

Dustin

Sure, that makes sense @Mani Swagath. 

Then yes, you could be onto something there if you don't foresee any issues with the property after it is rented.  It does seem like they are not doing anything.

I like having a PM because they are there any time of the day to watch over my property. I found that the more properties I have the better rates I can negotiate with the PM too.  

I personally don't see how to successfully show the property, collecting apps, and rent the property without a leasing agent though.  Too many problems come to mine without someone one on the ground there you can trust to show the property and not let anything bad happen to it.

Maybe someone does know how to lease the property without a leasing agent and will post here.  

Wow @Mani Swagath, that is a tall order if you want to have a close watch over your property. 

I use PM's for all my properties and they are my best friends! Not literally but they are the hands and feet of my business.  They make my life so much easier and all I do is cash my checks from them while they do all the work. :-)

With my PM's I figure these expenses are the cost of doing business. 

Now, what you can do, and I do not suggest it, is to find a leasing agent who will list, show, and lease the property to the tenant.  You will pay the leasing fee but then you have the tenant pay you directly.  The problem is you still have the leasing fee but you would not pay the monthly PM fee.

Now your property is much more hands on. If there is any issues, the tenant calls you and you have to find someone to deal with it.  Those calls for repairs may not actually be needed to be done by a contractor for a high cost when the PM could take care of it much cheaper.

So, all that to say, I personally use PM's because they make my life easier and I pay them well to do so.  Just like my Accountant, I love paying my PM's because they make my life easier and the work they do makes me money every month!

Hope it goes well for you!

Dustin

Hi Kelly!

It really depends on who you are talking to in my opinion.

Myself being an investor in real estate already, I love wholesalers and want to know as many of them as I can and that they are wholesalers.

For someone that is not an investor, they may not know what a wholesaler is and it may confuse or scare them away and not invest.

It may be good to tell those who are not investors already that you have a terrific opportunity for them if they would like to invest. Remember that you have the opportunity that you are allowing them to be in on.

Where are you locating deals? Maybe I'll want to be on your list.

Hope it goes well!

Dustin