All Forum Posts by: Joe P.

I concur with @JD Martin - this is America, you can sue anyone. But the question is, is it worth it? How much financial damage has this cost you? Chances are -- whatever that number is -- will be lost in legal fees and/or time in trying to sue.

Also, if you need legal advice, ask a lawyer. They can help you decide if you have a case or not and it'll be worth it. My non-lawyer advice says probably not.

Huh? Haha

@Matt Burr not so sure I agree with that. Every property will have a headache; if you're making money off of it it should be "worth your time" -- is $5 CF worth your time when things are not good? I don't know.

@Dontrea Riser as you can see, a lot of different answers. I think Brandon Turner coined and pushed the $100 CF per door/per month figure, and a lot of folks use it. I think it's a good number to use.

My current duplex I estimated would cash flow about $222 per month, so $111 per door. My "all-in" figure was $31,728 for my down payment of 25% and closing costs. I've YET to turn a profit in 18 months, although I am close. The reason is for this is that I grossly underestimated, and did not adequately prepare for, CAPEX/maintenance issues outside the purchase. I should have setaside 8-10k, which would have lowered my COC return, but not my profit.

Let me explain - I would have, at $31,728 and my initial investment, made about 8.42% COC return. If I did $31,728 plus another 8.3k (around 40k), my COC return would have gone down to 6.68%, but I would have "made money" because instead of taking my cash flow to pay for those unexpected items, I would have used my setaside reserves. But I still paid one way or another. :D

Went through this myself, ignored the numbers and found out my unit was barely breaking even. Eventually sold the property and got a check for a smidgen of equity, which I then turned into a duplex.

If you have the equity and think you can sell at a reasonable price, usually the equity is a good thing and can fund a true investment. But even if you don't have equity, most of your rent is paying your mortgage here. There's no cash flow.

Depends on the property, but 10% for CAPEX, 10% for maintenance, and one month rent for vacancy works. Also I assume you're managing this yourself?

"We don’t owe anything on the house." - what does this mean? How did you purchase it? Cash? Did someone hand you a title?

"and water and sewer is in the owners name." - what does this mean? Are you not the owner?

You are taking CAPEX and adding maintenance and vacancy into 10% - that seems like an overly hopeful campaign. I get that your property is almost brand new, but its better to be conservative and pleasantly surprised than overly hopeful and extremely disappointed. Once a tenant starts using plumbing, electrical, appliances, etc., the problems will arise.

Just listen to this statement...you are setting aside $120 a month (1440 a year) for, in your words...all CAPEX, all maintenance, all months with a vacancy (which by the way, a full month would eat up basically all of that money), and any miscellaneous items. Haven't even touched on the monthly water bill. I think $405 is a stretch.

You need education, @Ryan Rex. The idea is that you want to make money on these properties. Recommend browsing the site and reading as much as you can on the entire process of identifying, evaluating, and running income properties.

Just because you have the money available doesn't mean you should invest.

Smart investors invest for cash flow or appreciation (or both), make money on the purchase (buying below market value, adding value via rehab if possible), and manage conservatively (being realistic with costs, expenses, rehab, etc.).

Yeah, buying it at half price, maybe.

Everything you've presented here is just wrong, man. RUN.

You need to use realistic expenses whenever you evaluate properties. People use 10% CAPEX, 10% vacancy, 10% maintenance, and don't forget management, utilities that landlord is required to pay, city/state costs, etc. I see this has an HOA, which is called a money-sucker.

Honestly this entire evaluation seems like it was devoid of any previous knowledge or information on RE. There are many books and articles out there you should be taking advantage of, that have tremendous amounts of information available on how to properly evaluate properties for purchase and for cash flow. Brandon Turner's book is probably the first I would start with.

How are you buying a $850,000 property for...nothing?

How are you only paying $3,000 in closing costs for a $850,000 property?

Why would you buy a 4plex for $850,000 but only get $4500 a month in income? Even if you raised the rents to $1600, that's still $7,200 and is not enough to cover you.

Most importantly, your estimates for expenses are, for a lack of a better term, a joke. You are setting aside NOTHING for maintenance, CAPEX, vacancy, et al.

If this is some kind of joke post where we spot the worst deal possible, do we win a prize? If so I'd like to claim it. This is horrible. It's like not even close.

My favorite part of the calculator is the 50% rule. It shows you after income-taxes-generic 50% expenses what your income will be. You will be paying out the nose for this property, and I think the minus 2k a month figure is being generous. Run, don't walk, away from this.

Came by to say Congratulations on your first deal! Also highly interested in the CF breakdown.

One piece of advice I give everyone - I see you put aside about 20k (or have estimated 20k) for rehab. Consider baking into your original sheet about 10k of "reserves" -- as soon as you get tenants into the units and they start using plumbing, electricity, heating, usable space, appliances, etc., that's when the problems which you didn't see on your initial walk-through will appear.

My first duplex showed well and even inspected moderately well, fast forward about 18 months and I spent way over both my CAPEX and maintenance budgets for the same time period. Prepare for the worst and be pleasantly surprised if the worst never happens.

Good luck! Share your CF breakdown if you are able, sounds like a lot of us want to see the kind of deal you got!