All Forum Posts by: Jon Kelly

@Dung Nguyen Can you share your analysis? What is your CoC and cap rate? Does it meet your goals?

I see this so many times on BiggerPockets... people ask if something is a good deal without doing or sharing the full analysis. 

I like to analyze properties both ways (1) using their current, or previous 12-months, financials, and (2) using my projections. I tend to make decisions based off of the first analysis, or how the property is currently operating. You're adding another layer of risk when you analyze properties from your projections. For example, you suggest rent can go as high as $1,200, which is a 23% increase from the 1st floor and 50% increase from the 3rd floor. There may be a reason they aren't renting for $1,200. 

I don't know what the 2nd unit rent is, but let's assume $900. Total rent is $2,675, which doesn't come close to the 1% (or 2%) rule at $340k... 

The good news is it appears the big ticket items are updated, so you can likely make your maintenance and capex assumptions low. 

@Alexander Johnson If they're on a month-to-month lease, why don't you just give them notice you will not renew their lease? Then, when it's vacant you can begin your rehab. 

You can rehab while the tenants are living there, but landlords rarely do it. It doesn't make a lot of sense in most situations to rehab a unit while it is occupied. One of the many benefits of rehabbing a unit is the ability to increase rent afterwards. It's very possible the current tenants will not accept a $200-500 rent increase. 

@Jason Hill If you can find another job paying $100,000+/yr, I would bet that gets you to your goals faster than working part-time as an adjunct professor or consultant just to pay the bills. 

If you plan to go full-time into real estate, what does your week look like? How much time is "wasted" as an adjunct professor or consultant because you need to pay the bills? How much time are you spending on real estate and how will you access capital? Can you do the exact same thing in real estate with a full-time job? 

@Jason Hill I'm confused. Are you asking would we move forward with the deals OR get a full-time job? Why can't you do both? Get a job to help fund the rehab on these deals. Both seem like good deals, especially house #2. 

@Byron Bohlsen 2nd option. The longer term the better, especially with low rates. The difference in monthly payments is less than $100... This buys you 3 more years to sell or refinance 

@Christopher Hand You need to speak to your property manager and ask why... While it seems suspicious, there could be a good reason for it. This seems like a silly way for a property manager to steal money from you. It's much easier and looks less suspicious to pay 1 plumber a larger bill instead of 3 different plumbers. 

It's not unusual to use multiple plumbers, especially on different days. There's a chance plumber #2's estimate for the work was much higher than plumber #3, and you property manager saved you money. 

Either way, always have 1-2 backup property managers in case you need to make a switch on short notice. 

@Jessica Khokhlan you won't like this answer, but you need to set your own criteria on what makes a good deal. Do you want a minimum 12% cash-on-cash, $100-200/mo in cash flow? Come up with these parameters and then you can adjust the purchase price to know the maximum price you can do up to. 

You can call individual lenders to understand their fees. Without knowing anything else, I would estimate it to be the same as your initial loan. 

@Jessica Khokhlan A few things stick out to me: 

1. No insurance? 

2. Management fee 5%. Did you confirm a property manager will do this for 5%, or are you self managing and "paying yourself" 5%? 8-10% may be more realistic. 

3. No fees to refinance in 6 months? 

The good thing about this deal is you're only putting 3.5% down and then you pull-out all of your cash when you refi. If you add in the cost for insurance and higher property management fees, you'll break even each month. You're relying on appreciation for this deal to work. There are likely better options out there. 

@Kelsey Mortimore If the numbers make sense, jump right in! Then, if/when the crash occurs, you'll have a lot more experience and you'll be ready to add to your portfolio. 

@Ryan Guffey Set a criteria. Are you looking for a property in need of rehab or a property that's already fixed up (e.g. buy and hold)? Let's assume buy and hold because that requires less work. Start in an area you are familiar with. Look up average rents in the area. Average rents should be 1-2% of the purchase price ("2% rule). If it can rent for $800, then look at properties between $40-80k. If you don't see properties that fit this criteria, then find a market nearby that does. 

I would ask a lender: will they provide financing for an investment property, how much, what's the interest rate, loan length, minimum down payment required). This will help you know if you qualify for financing and you will have the financing inputs to better analyze deals