All Forum Posts by: Account Closed

Hi Chad -

Great question.

50% rule applies to any property where you think an assumption of 50% operating income is representative of what you would likely experience if you bought the property. Have you checked the assumption? I know in my area of Philadelphia, there are certain towns where the r/e taxes are ridiculous and the 50% rule really turns into 25% rule!

You've applied the 50% rule and under your scenario you would be generating $4,200 of annual operating profits (pre income tax and mortgage).

I think the real question is what does your investment need to be in order for $4,200 a year to be attractive?

• $84,000 (or a 5% cap rate)
• $42,000 (or a 10% cap rate)
• $28,000 (or a 15% cap rate)

If you have access to public records via MLS, you could look at prices paid for similar properties and rents collected for similar properties and then estimate what the neighborhood is getting in terms of return on investment. But you find out people are willing to earn less on their money than is worthwhile for you.

Hi Nicholas -

First off, great idea with the video! Way to go. Did you use your phone to take the video?

Secondly, do you think the assessed value is over or under valued? If over valued, then you should probably walk away from the deal. Meaning, your rehab cost is going to be $45,000 at a minimum just by the looks of it. You didn't mention rewiring the house in your post but I think you saw that there was  fuse box and will likely have active knob and tube throughout. It is difficult for a home owner (at least in my area) to get a mortgage with active knob and tube wiring. Rewiring the house is hefty - I'm about to do a house that is 3,000 SF and will cost about $10,000 to rewire it.

The only thing I can think of to make this a deal might be to level the property and put in pre-fab home like a 1,500 SF rancher. Can you find ranchers in the area?

Jack - Great idea and I will surely implement ASAP!

Hi Gwendolyn, I believe so although I haven't done it before.

Hey Terry - I think if you are going excel or google sheets based, I would go simple. My spreadsheet has the following fields:

• Status (I toggle through "Working", "Follow Up", "Dead" or "Farmed Out")
• Last name
• First name
• Street # and name
• City
• State
• Zip
• Phone Number
• Last Follow up date
• Next Follow up date
• Asking $
• ARV $
• Owes $ (i.e. the total of all liens against the property)
• Offer $
• What's next

I use it more like a dashboard. I know there is a lot more to a particular property (comp data, renovation spreadsheets, what the seller told me initially etc. etc.) but the spreadsheet keeps me focused on which properties I need to follow up on. I can then sort on next follow up date every morning and see who I need to follow up on each day.

Good luck.

Hey Blake - Great question. I like the idea and will actually be doing the same. The only risk I see (at least in my own case) is whether diverting my attention from real estate will be a detriment to my real estate activities. Time management will be more of a challenge but it isn't impossible. It may not be as big of a deal for you if the real estate activities will be more of a supplemental income stream (for now).

@Joel Owens - great points and thanks for your input. I believe we are saying the same thing. I still use an inspector, but now I know what to expect from them.

@Jay Hinrichs - What do you mean by "8 foot 2 course of 24 by 60 blocks that weight a bunch"?

What we ended up paying was the lowest we could find but I'm sure if we had the right relationships, we could have done it cheaper. I might have to get your input next time I run into a retaining wall issue :)

Great job on the rehab Huy! Did you use a general contractor or did you sub everything out?

Hi Leigh - I would think you want to have your listing agent do that. If you didn't have the listing agent involved, then reaching out directly wouldn't be a problem.

Do you know what each of the buyers are? Meaning are they both investors is the financed offer a end user and the cash buyer is an investor? If the later, you might want to think about whether you've brought up the cash buyer to his max allowable offer. Just a thought.