All Forum Posts by: Jack Inman

@Erin M. 5 doors should be fine for self-managing. It would take up quite a bit of time, but certainly doable even with a full-time job. If you go much higher than that, then it may be time to look into hiring a property manager. One of my old landlords was a full time police officer, and he owned 6 properties that he self-manged. They were all on the same block, so that cut down on wasted driving time. 

Most of the investors that I work with have a few properties; I'd say most have a portfolio of 5 or fewer. There's a lot of literature geared towards building a large portfolio, but plenty of investors do fine with just a few properties.

@Portia Bates I wouldn't get too concerned about refinancing as quickly as possible. If you can show the bank that your property has performed well over the course of 6 months to a year, they may be more willing to give you a larger loan.

Yes, from the bank's perspective you'd have 30k in equity after the refinance. So, they'll give you a check for 70k and your monthly payment would be based on that 70k mortgage. Hope that answers your question; if not a little clarification might help.

Commercial appraisers are generally supposed to appraise buildings using all three appraisal techniques; cost approach, comparable sales, and the income approach. In most cases they then take a weighted average of the three figures, which in your case would likely be weighted more towards the income approach.

The income approach takes into consideration physical depreciation, rental income, vacancy rates, basically everything that affects cash inflows and outflows. So, if you can increase the rental income and take care of some depreciation/ looming capital expenditure, then you should see a proportionate increase in appraisal value. However, if the appraiser decides to put more weight on comparable sales, then the subject property's value will be somewhat skewed towards the value of the comparable sales. 

As for waiting to refinance, that's probably a question for your individual bank. They should be able to tell you whether building up rental history for a few months is necessary or not. The bank I use doesn't require a seasoning period, but if you can show a track record of success they'll give you better rates; your's may be similar.

Frayser generally has a bad reputation in Memphis. However, recently there's been a lot of investor activity in single family homes and several commercial developments. I personally don't invest in that area, but others are with great success. Just look at nearby comps and make sure you're not paying above market value. 

@Chris Roush John Thedford is offering pretty good advice; the wholesalers that I've dealt with have been shady. Sometimes they swindle the elderly/uninformed to get a house under contract for less than market value, and they give out all kinds of bogus ARV's.

That being said, they do find good deals sometimes. Just don't put any weight in the information that the wholesaler gives you. Hire a good home inspector, make sure the house has clear title, and verify rental rates yourself. 

@Juan Rodríguez   House hacking would likely be your best bet if you're in college. Buy up a primary residence close to campus, and rent the place out to some guys who will pay down your mortgage for you. If you buy a fixer upper/good deal you could also flip the property if done properly. 

@Jer Yeung Yes, quite a few California investors are cashing out of their local properties and buying properties in higher cash flowing areas using 1031 exchanges. Like you mentioned, appreciation in Memphis is relatively mild; usually it is pretty close to the rate of inflation, 2-3% / year. So, cash flow will be the primary investment driver in a market such as ours. 

You could buy a few investment properties in Memphis at 60-65k and rent for $800-850/month and cash flow enough to offset the lower appreciation rate. 

Right now the market is doing well, so it's important to make sure that your investment would still cash flow in a recessed market. Play around with the numbers; double the vacancy rates, make sure you have adequate cap-ex cash set aside etc. If you do the proper due diligence you'll be good to go.

I like the 50% rule quite a bit. It's not as accurate as breaking down the expenses by line item, but in my market, it is a relatively accurate metric that is quick to calculate. I use it all the time.

@Peter Green Your ROI after the refinance is 'inf%' which is about as good as it gets. The calculator is showing that you're able to pull out all of your cash, so any return you make after the refinance is free money. That's a very good thing. Your numbers look great.

The only thing I see that looks odd is the loan amount after the refinance. You've got the ARV listed at 175,000 and the loan amount after the refi listed as 145,000. Generally banks will let you pull out 75% which would be 131,000. Regardless, you'd still be able to pull out more cash then you put into the project.