All Forum Posts by: Austin Fruechting

Insurance of $200.00 a month seems very low. Is that an actual quote or a guess? 

Overall, the 37% expense factor seems low in general unless everything is nearly brand new. 

Dan Heuschele - I absolutely agree. That's why maintenance and cap ex expenses as a percentage of rent is a terrible idea. I'm just curious how much he's factoring for those expenses and how a $975 a month rental purchased for $50k comes to a negative return. A 1% rental at $50k is absolutely terrible, but 1.95% still negative?? Just curious on his numbers and assumptions on how he got to that.

@Justin R. - I'm interested in how you modeled your returns. Such as how a $50,000 property renting for $975 is a losing property. And how you arrived at a $90k duplex renting for $1665 making $122 a month (5.41% on $27k invested/12 months)

If I ever had access to that as an option, I would use it!

Originally posted by @Ryan M.:

BTW listened to your podcast. Side bar, but how the hell did you get banks to give you an unsecured LOC??

What do you usually put in (percentage wise) for expenses on BP calc?  40% total (meaning 10% each?) 

As far as LOCs; I asked! 

I don't use their calculator. Not because I don't trust it, but because I've always just done my own analysis since I started. At the beginning I ran full analysis on everything, line itemizing out every expense. Since then I've gotten familiar with my area and recognized average expense ratios for different properties based on conditions, level of finishes, and rental rates. Nearly everything I have ranges in the 45-55% expense ratio depending on the property. 

At this point I just look at the property and apply the appropriate total ratio. On a large portfolio I did last year, I factored 55%. I received 3 years P&L's for each of the 80 units and compiled them in excel. It came to 54.5%. 

Ok, so 3 units, 4 beds, $2600. Let's call it $1000, $800, $800 for the respective units. 

25% down on $340k = $255k financed

$255k @ 5%/20yr = $1680

.

50% expenses = $1300 expenses & $1300 NOI.

Cash Flow = -$380 per month

.

45% expenses = $1430 NOI

Cash Flow = -$230 per month

.

40% expenses = $1560 NOI

Cash Flow = -$120 per month

.

I find it impossible to believe at those rental rates 35% is "extremely high", especially with $5k in property taxes. But even at 35% you're at $1690 NOI and finally cash flow positive a whopping $10 at a 5%/20yr mortgage. I would be very curious to see how that guy analyzes this deal. I wouldn't touch it near their asking. There's a reason it's been on the market for 4 months.

What's the total rent? Post your numbers here for better feedback. 

You can put whatever numbers you want in a calculator. What matters is that you put the right numbers in! 

"If you torture data/numbers long enough they'll tell you whatever you want them to."

Originally posted by @Darwin Crawford:

@Austin Fruechting - I'd be honored to have you post something of mine to your blog!  Please feel free!

 If you're cool with I think I might, obviously with credit given! I'll contact you soon.

Originally posted by @Darwin Crawford:

@Austin Fruechting - thank you!  your blog is fantastic BTW, very inspiring.  Working on getting to your level, not there yet though....

 Thanks for checking the blog out! I was actually reading your post thinking this would be a great post! LOL

That was great! Good share!