All Forum Posts by: Jordan Finkelman

Welcome to BP!  Good luck with your goal.  I just recently mapped out my 1, 3, 5, 7 and 10 year plan.  It's ambitious as well.  Maybe I will make a post on it at some point.

@Elliot Smith

Your welcome!

Maybe you could try to have him deploy 100k each into 2x 200k investment properties for a total of 400k in assets.  Overall, 50% leverage.  Transaction costs would be higher but you also would have a better shot at higher gross rents.  Just a thought.  I think without leverage, the vacant house idea requires less work than a flip but more than buying a stabilized asset.  It depends what his experience in the business is.

You could explain the benefits to him of having his property pay down it's own debt with the cash flow and eliminating the leverage (possibly using a 15 year loan).  This way, it amortizes twice as fast although probably won't be able to be cash flow positive even with half down.  In other words, he shortens his time "at risk" of having leverage, while at the same time quickly increasing his equity which helps provide an equity cushion.

List it as residential, but I would still price it with a market cap rate that you feel is right for your property. Also consider your buyer profile and how you will find them. Just listing it on the MLS might be enough, but you should also explore other marketing channels to get your listing in front of the largest pool of local investors.

Sounds interesting, keep us posted.  I consider 7 out of 50 to be a pretty strong response rate.  Check out this BP post from a week ago if you have not already: 

http://www.biggerpockets.com/renewsblog/2015/03/10...

 Account Closed

Did you end up buying this? Just curious and if so, did you underwrite with higher capex/maintenance expense? I would definitely still make my own analysis independent of the numbers provided to you from the owner.  Even if you verify a historical 2% capex/maint expense, you still should assume it will revert to the mean of a combined 8 - 15% based on experience of many BPers.  Just my 2 cents.

If NOI is 815 per month, same as 9,780 per year. When you calculate cap rates, you do not factor in the mortgage. This is why you are getting such a low number. The true cap rate (on the asking price of 165k is (9,780/165,000) or 5.93%.

What I believe you are trying to calculate is the cash on cash return. However, for this calculation, you take the 3,180 figure (which is NOI - Financing Expenses, on an annual basis) and divide it by the total cash invested. If you buy all cash, your cap rate will equal your cash on cash return. However, if you finance it and pay the 165k (will assume conventional 20% for illustration purposes), you will put down 33,000 into the deal. Therefore, your cash on cash return with financing is 9.64%.

To recap, with financing using the above assumptions, your cash on cash return is 9.64%.  Regardless of whether you finance or pay all cash, your cap rate is 5.93% if you pay 165k.  I would not pay the ask price, 5.93% cap rate seems very expensive ESPECIALLY for Ohio.  Keep looking for better deals or offer way less in my opinion.

Thanks Gabriel!

I don't know why the pictures I posted earlier did not work, but I will try again below. 

Left: Nashville, TN

Right: Miami, FL

See a difference?  The properties just look nicer overall in other markets.  Maybe it doesn't matter that much but just something i noticed as a common difference in characteristics.  All other things equal, I prefer to own the one on the left.

Thank you for the input.  Definitely a good idea to check with some property managers.  Anybody have a good local company to recommend?  I checked out the BP directory and there are PMs for almost every state - except Florida.  

I appreciate the geographic advice. That's a really practical strategy - to focus on SFR's in Miami and focus even more on broward and north of there (inclusive of MF).