All Forum Posts by: Igor Messano

I am trying to get better at evaluating my deals and one of the things I am looking for is to better estimate capital expenditures. I am okay with generalizing maintenance expenses by a % of the rent depending on the age of the property but I really hate doing that for Capex.

One of my properties is in an emerging market in which rent prices are steadily rising every year. The property is non traditional in a sense that it is TINY. We are talking about 750 sq ft. The roof is a flat roof which costs about $1100 to replace in our area. 

I want to build more precise worksheets so I can have a better idea of the true cash flow in the future. Does anyone have a list of Capex's that they use to do the same? I want to do this for existing properties and for some of my next deals.

@Joe S.,

Then yes if your analysis is correct, this might not be the best deal for you. There are plenty of great areas in Philly that can you give you a much better return but that depends on what a "good" area is for you. There are neighborhoods in Phila that any tourist walking down the street would think it's a D-C area. But when you look, the homes are selling for 300-400K and demand some serious rent so it is all relative.

If you were willing to go to some of the more "up and coming" areas, you could get some serious CoC returns but it is all about comfort of managing and certainly a huge consideration for house hacking.

@Joe S.,

Hey Joe, 
First welcome to BP and congrats on starting to look and analyse your deals. Just so I understand the deal correctly, is the gross rental income for this Triplex $2000 for the entire triplex or just for the 2 units you would be initially renting while living there?

If this is for only the 2 units, then this might be a better deal than you are giving it credit since the true gross income of the property is more. You can't forget that you are forgoing receiving rent to live there and once you complete your "hack" you will be receiving the full amount.

If this is the case, you would be living for practically free until you move. Then you would have a great rental.

@Thomas S.

You might have misunderstood her post. I think she means she lost 9K when comparing what she could have gotten if she rented at market value. Meaning she lost 100 per month, per unit, accumulating to 9,000 for the year, which looks like 7-8 units.

@Aaron Anderson,

Have you looked at some of the requirements lenders have for lending 203k? Although it is not exactly forbidden for the homeowners to do the work, most lenders will quickly shy away from this loan because of the added risk involved in owner rehabs. Depending on the extent of bathroom rehab and the concrete driveway, you may also need to pull permits which are additional costs and depending on the lender, be required to have a licensed contractor do/sign the work.

Best of luck.

Hi everyone,

I have a question regarding calculating debt to income for lending purposes. I always calculate my own debt to income so I know which lenders I shouldn't waste my time with and whether I could close close to getting lending in the first place. When calculating debt to income for a property that is under current lease, most lenders let me use 75% of the rent income.

What I was doing was adding 75% of rent to my monthly "income" column and the PITI to the "debt" column. When I noticed that my calculated DTI ratio was higher than the lenders calculation I asked some questions and turns out that what he was doing was adding the net rental income to the income column only which looks much better for debt to income.

What have been your experience with lenders calculating your DTI? Does this work the same way when buying a second property and looking at the rent and PITI of already owned properties?

 Jalen what sections of Philly have you seen recent buy and hold investors look at? I am trying to narrow down smaller sections of the city for my next rental.

Hey Malik,

First, congratulations on being smart enough to not blow an inheritance and instead look towards investing your money. You are at a great advantage by looking to invest in real estate, having a starting capital, learning about BP, and being young.

If I was in your shoes I would absolutely venture outside of your surrounding area to be able to get a better ROI. This is not to say that it will be just as easy. There are a lot of things to consider when buying outside of your area but it doesn't make it impossible. Look to narrow down what areas you would like to invest in and don't rush into something blind. Use biggerpockets and other resources to help you understand the areas and the risks involved.

You could also look into partnering with another investor or real estate agent that can bring a greater understanding of the area to the table. I second @Jalen West that Philadelphia is a great market in many small developing pockets but as mentioned above, you need someone that REALLY knows the area to assist you. I myself am a new investor in Philadelphia and even being from the area I elicit the help of others before putting my money in a property. I am currently looking for my next rental so if you think Philadelphia might be a choice for you let me know and I will be glad to give you any insights I have.

Best of luck,
Igor

Congratulations on the milestone. It's very encouraging to see something from my area succeeding and getting deals done without much cash in! Wish you continued success in the coming years.

Yea that is definitely a hard situation to get out of and I hope you can work it out. Let us know how everything turns out with the financing and leasing. 

Best of luck, Igor