All Forum Posts by: Karen M.

Hi Everybody,

OK, so.... I am starting to learn more and look at "deals" and try to figure cash flow for multiple properties using a spreadsheet. This is mostly practice right now as I learn how to look at properties on paper for cash flow potential. Eventually, we would like to get into buy and hold for long term rental income.

QUESTION #1 --- Are duplexes really a big PITA? I'm reading Landlording on Autopilot by Mike Butler and Building Wealth One House at a Time and both mention that duplexes and small apartments are for investors and that it's harder to negotiate and harder to unload these properties. But since our model is buy and hold, perhaps I will never need to worry about unloading them.... except for that exit strategy business...

OK. So I've been studying our MLS for like, 10 - 15 days, and I've been curious about a few duplexes that are near where I live. A duplex very near my home has been on the market for *11 months* and three duplexes on the same street just had their MLS listings expire, unsold. I am not crazy about the street full of duplexes, it doesn't look like "home" to me... but the one in my neighborhood looks interesting.

So anyway.... back to the question #1.... are duplexes a big pain in the rear, or are they a decent choice for buy and holders? Does the slower duplex market make for better deals for the buyers?

QUESTION #2 --- How do I calculate return on investment? I am quite confused on this. Let me show you the math for this duplex on the market near my house.

$239,900 asking price
$204,000 hey maybe I could work out a 15% discount?????? Is that a big reach?

$ 51,000 one heck of a 25% down payment

$153,000 amount financed @ 4.5%

$ 2,100 total rent income
$ 1,050 50% of rent income (this is actual rent now)

$ 775 principal + interest for 30 years @ 4.5% (do I need to add ins?)

$ 275 projected cash flow

Now.... first off, am I doing these calculations correctly? And, how do you figure return on investment? As in, to decide whether this is going to be a good investment vs. looking at other, non-RE opportunities, or even other RE opportunities? And, as buy and hold does the roi get better over time?

QUESTION #3 -- I am also looking at some "cheap" distressed SFH where I can see pictures of holes in drywall, ratty wood floors, stuff like that. Are there any good places to read about rehabbing?

QUESTION #4 -- It seems that interest rates are going to go up. I don't want to feel pressured to get into RE but I wonder how rising interest rates will affect RE investors and the market and people who are starting out w/ RE.

THANKS A BUNCH!

Karen

I'm one of these amateurs looking to get into rental properties.... carefully... The article's comment about getting into real estate for a lack of trust in the stock market is part of my thinking. We will step in carefully and with cash reserves.

J Scott, thanks so much for the link to the video. I saw you and Marty and your insurance guy at the Milwaukee REIA meeting on Tuesday night. I was on the other end of the room, first-timer taking it all in and feeling a little overwhelmed, so I didn't seek you out to say hi. But it was very cool to see you guys. :)

Thanks Jon, I appreciate it! I was trying to run a spreadsheet using the 50% rule with taxes included and everything was coming out as very negative. Time to try again, this should help!

Hi Everybody, when you run the 50% rule..... do you include tax payments in your equation? Right, I'm guessing that is a yes.... so 50% of your total rent income needs to cover principal, interest and taxes?

I was watching a video and thought I saw that property taxes were excluded for the 50% equation but I don't understand why or if that is the way investors do it.

Thanks!

Brandon Turner, this is an awesome video -- I watched it the first day at Bigger Pockets and have been thinking -- I have to go watch that video again! Love your energy and I love all the podcasts too. You make it fun and un-intimidating. Thanks for the great site!

Hi Brian! Good question -- I'm in the same boat and will be going to an REIA meeting on Tuesday.

I have business cards for my fitness instruction business that I will bring along.

My big question is --- do people dress up? Should I wear "church clothes" or jeans?

Have a great time at the meeting. Ours has a speaker and I am just going to be myself and have a good time and hopefully meet nice people and learn something. I'm not planning to write any checks at the meeting, except for the $20 to get in, so I'm not worried about getting taken advantage of by anyone. I would expect the people to be nice and welcoming. We'll see how it goes!

Hi BP Friends,

I have a few basic questions about buying a building that has existing tenants.

So, if I was to buy a duplex or multi family that has tenants in it.... what happens?

1. Do I inherit their leases or write new ones?

2. If the renters are month-to-month, does that stick through the sale
(why would you go month-to-month?)

3. Does the previous owner pass the tenants' security deposits to me?

4. What else do I need to know about getting tenants with a building?

5. Is it normal to ask the seller / seller's realtor questions about the existing tenants and their payment history? Like, have they been late, had any issues, etc?

6. Do you consider the quality of the tenants in your property evaluation? For example, I looked at an area where a seller is selling 3 duplexes in a street that is lined with duplexes. If you were to buy one, how would you choose "the pick of the litter?" Do the tenants figure into that equation?

(I'm new, so the thought of getting renters with a property is appealing, less work to market the property and screen if the property is set up an functioning well as is. However, I obviously need to learn about rental marketing, screening and leasing.)

Thank you so much!
Karen

Thanks Jenkins, a short meeting on a Tuesday night is generally better for me than an all day Saturday meeting... but hey, if Tuesday is great I might want to see more. Thanks so much for the tip.

Good advice, thank you Dan C.!