All Forum Posts by: Jake Hartnett

Jeremy,

That's great advice from Anthony to nail down your rehab costs.

The first thing I would do is write down all of your numbers. Rehab, holding costs, and ARV.

In a similar vein, you can walk the house with a couple agents and other investors in your network. Ask them what appliances, fixtures and finishes buyers are looking for, and you can nail down a good ARV.

Now you have your own numbers you came up with and all of the numbers your professionals gave you. Even if it turns out to be a bad deal, you have learned a ton about all of your numbers in that market. Even if you lose your $1,000 earnest money, I would consider that a cheap lesson.

Good Luck.

Jake

Bob Bowling thanks for your input. I haven't thought much about FMV because for me it's very difficult to determine and is only relevant if I sell it. This is in a town of 4,000 people so there aren't a ton of comps. I have looked at similar properties in different towns, and this seems to be in the ball park, but it's not apples to apples. The value to me is the price at which it cash flows, that could be different than FMV, but that to me is irrelevant. How do you approach FMV? Michael W. I will certainly offer less than asking, it has been on the market for a number of months. That would help. I might be able to raise the rents a touch after these leases are up. Thanks for your help.

@Jonathan Sher - My understanding is that the tenant pays all of those expenses, even though it is customary in this area for the owner to pay for Sewer/Water and Trash. I have not seen the leases yet, so I cannot be sure.

@Michael W. - I will definitely be managing this myself. I add that line item because I want to see the job separate from the investment.

10% for maintenance and 10% for capX kills it. 4.3% COC and 13% ROI w/ tax benefits.

At 15% for both as you suggested I'm at 7.6 COC and 16.5% ROI w/ tax benefits.

I'm all for conservative estimates, but I don't want to walk away from a good deal because I'm being too conservative.

Is there a deeper discussion about estimating maintenance and CapX?

Thanks.

Hello everyone,

I would like your help analyzing this deal. I don't see anything close to 2% deals around here, so I'm just looking for something better than 1%. I work full time so I'm not looking for a fixer-upper, just a nice place that cash flows and doesn't suck too much time.

This deal is a solid duplex built in the 70s (most places around here were built in the 1880s.

Asking $139,000 (but its been on the market for a few months)

$1700/month rent (1.22% of asking price)

tax $2700

insurance $1400

Maint.CapX (10%) $2040

Management (10%) $2040

Vacancy (10%) $2040

NOI $10,180

20% down at 4.5% interest for 30 years is $563/month $6756/yr

Cashflow $3424/year ($285/month) so $142 per unit

I also expect over $2000 in tax benefit.

That's a profit of $5424/$30,000 down for a 18% return on investment including the tax benefit.

There is very little inventory in town for rentals, so I expect a much lower vacancy rate.

Roof is newer, water heaters new, furnace new. Kitchen/Bathrooms can use updates someday, but are very usable.

Any feedback is appreciated.

Thanks.

Jake