All Forum Posts by: Jaysen Medhurst

You're missing a lot of expenses. Capital Expenses (like that bathroom) and Repairs should each be figured at ~7% each of Gross Rent, that's almost another $200/month. Vacancy is another 6-8%. At this point, you're just breaking even.

Other things to consider: 

• Since it's a condo there's always the chance of a special assessment coming through. This could kill a whole year (or more) of cash flow. 
• Does the complex allow rentals? For how long? Some only allow subletting for 1 or 2 years max.

All is not lost though, cash flow isn't the only thing to consider in RE investing. You'll see some tax savings through depreciation. I would estimate ~$4500/year (confirm this!), so that's essentially ~$125/month in your pocket (at the end of the year). Of course the tenant's paying down your mortgage, but that won't pay off until you sell.

Lastly, is appreciation and this is where the deal may turn in your favor. Boston is really hot (for now), so you may see a lot of appreciation. At only 6%/year, that's a profit of $11,700 in the 1st year, not a bad return on $40k down.

I highly recommend doing a full analysis of Internal Rate of Return (IRR). This takes into account all of the different aspects of RE investing and compares it to other options (like index funds). There's plenty on BP about IRR.

This book by Frank Gallinelli is a rock-solid guide.

Hmm...I don't know of any sites, but if you're willing to do the work you could: 

• get a list of all sales/deed transfers in your area
• sort by "$1" (those are usually foreclosures or inheritances)
• then check the new owner against the old.

1. If the new owner is bank/company, that's a foreclosure.
2. If it's a person's name (especially, with the same last name as the former owner), you probably have an inheritance.

Good luck!

Would love to see a further breakdown of the expenses. Any opportunity to sub-meter utilities? That can be an instant value-add.

Also, typically you can't get a 30-yr commercial mortgage. Those terms are usually 10 years (though amortized over 25-30).

What's the Cap Rate in the area? That will determine the property's value and how good a deal this really is. 

Does the place need updating? How much cash over the purchase price will you have to sink in?

As far as financing, it's worth exploring Seller Financing or Finding a Partner.

Good luck! Let us know how it goes.

Tye, start with the Flipping Calculator here on Bigger Pockets. It's worth the monthly subscription all on it's own.

Not sure what "Cash Flow Velocity" is. If you're flipping, cash flow (i.e. rental income) is a relevant metric. You're missing the most important things above: ARV (After Repair Value), Purchase Price, and Rehab Costs. That's the ball game.

For inspiration check out This Old House Magazine. They have a monthly "PhotoShop Redo" feature. Lots of great ideas.

Chris, if the duplex is a good deal, it's a good deal. Use a bit of caution. Whenever I analyze a duplex the numbers just don't work out, because the costs can only be split across 2 units (e.g. cutting the lawn costs the same if the property has 2 units or 4). 

Maybe you found a winner. Post the details, we'll take a look at the numbers and tell you what we think.

PAY OFF THE DEBT. Starting with the CC. Get to $0.

Hi Ed, my wife and I live in a rent stabilized apt in Manhattan. Much of what you cite above does not align with my understanding.

#1: no tenant is going to be okay with you raising the rents, no matter how much nicer you want to make the property.

#2 you need a darn good attorney who understands the NYC laws. DO NOT try to go this alone. You'll get eaten alive.

I know it looks tempting to compare regulated rents with market rate and start fantasizing about the potential property, but it is incredibly difficult to make that a reality. That's exactly why these rent laws exist.

Hi John, there's a lot going on here. My thoughts:

BRRR strategy would give you an offer of $46-$52k. [(ARV - Repairs) * 70% or 80%]. That's a good place to start. This allows you to pull all of your cash out once you refinance.

Looking at it strictly from a cash flow perspective; the 50% rule puts you at $9900/year NOI. At an 8 Cap that give you a value of $123,750, which I doubt the market will bear. Perhaps the Cap rate is higher in your area.

With regards to financing, I wouldn't bet on seller financing. If she has private money now and she's having cashflow problems, there's more to the story and you probably don't want to be a character in it. Do you have cash to invest? You can probably get it all done with less than $40k ($12k DP + $24k reno); and get that out with a refi.

Even if you don't pull out your money, you're looking at almost 19% cash-on-cash return. Not shabby!

A question, is there room to raise the rents? Funny that a 2bd is only renting for $50 more than a 1bd.

Lee, why make the purchase through your business? If the note is your name the, you can usually still have the property listed under an LLC. Maybe the rules are different up in Canada.

What kind of rents are you expecting? Duplexes are tough to make cash flow, because you only have 2 units to spread the fixed costs over.