All Forum Posts by: Kelton Johnson

@Jelani Tate

I actually created one in my free time.  You're welcome to take a look and see what you think.  You can simply pull up the link below and make a copy for yourself to use and edit as you'd like.  Feel free to let me know if you have any feedback on the sheet to, I'd appreciate it! 

https://docs.google.com/spreadsheets/d/1Txmgi8cdxC...

Thanks, 

@Jay Hinrichs

That's all great to hear, I'm not going crazy when I consider tons of extra expenses on my potential properties.  I think ultimately, that is what scares me most about turn-keys, it's not that they are trying to rip anyone off by any means.  Of course they want to make their clients money, however, their is no fiduciary duty...they are trying to make money, right?  So, if that means not advertising certain costs, then obviously that is what they have to do to stay competitive.  But in nature, that mentality from someone you are going into business with is someone worrisome. 

I really hope none of this comes off as me bashing on turn-key investment, because they certainly can be great investments, especially for passive investors.  But for someone who has the time, knowledge, and patience, I feel there are definitely better bang for your bucks out there. 

Jay Hinrichs I know you are the turn-key guru around these parts, so I wanted to see if I'm on track with what I mentioned a few post prior in this thread. Are those additional expenses that turn-key providers don't usually provide? If so, why not? Is it just because they fluctuate and are hard to pinpoint? I just feel like it can potentially be misleading for newbies, not that I'm an expert by any means.

@Clayton Mobley 

Hey, I took a look at a couple of properties on your site right now and I have some recommendations to make.  It appears that you are running somewhat deceptive financials.  The only expenses you are including are taxes, insurance, and property management. 

1.  You really should include figures for maintenance.  I know this number fluctuates, but you even said yourself that it comes out to ~2.6%, so why not include ~3% for maintenance.  

2. Capex is also something you can't ignore, I know that 2.6% no way includes large repairs such as roof, HVAC, etc. (even if those things are put in new when you buy it, they will still need repair some time down the line).

3. Your property management figure does not include a leasing fee, something I'm sure the owner will have to consider when making the purchase.  I'm not sure if your company is the one managing or you are using a preferred provider, either way, you should include this in your numbers. 

4. closing costs...I know these also fluctuate, but they also GREATLY influence returns, especially when financing. 

If I include these things it brings your returns down considerably, from over 20% cash on cash with financing, down to about 9%. (And that is including your VERY optomistic vacancy rate of 4% and low maintenance and capex of a combined 5%). 

Not saying those properties are bad deals.  However, I just wish turnkey providers gave more realistic figures. 

Food for thought.

Andrew Herrig Yeah, it definitely seems a bit high for me as well in the Oak Lawn area. However, it looks like an average updated one bedroom can pull in $1200 unfurnished which would still put my cashflow at roughly $350 per month, but of course it is going to be furnished so that will add at least $100-$200 in extra value.

Sundeep Amin Thanks for the perspective! There definitely is still some due diligence to be done with this property, but I agree that it seems like a great deal from a cashflow perspective! Funny enough, I actually found a lender who will let me put down 20% too, just a slightly higher interest rate. So I only have to put up a downpayment of $17k! (Giving me a bit of a buffer if need be)

@Mark Spidell

1. This is a great tip, I haven't dug too deep into the HOA rules and regulations. I will make it a point to look into them.

2. I haven't thought that far, I figured if the current tenant wants to stay and is willing to pay $1550, I don't want to rock the boat.  That being said, if he leaves or something happens, this is a great option.  More involved, but could have a great payoff. 

3. This actually crossed my mind.  I don't think any others are on the market, but either way, I don't have the capital to pick up any more myself right now.  However, this is a great option for the future (or the even bring other investors in on). 

4.  From the sound of it, it's a guy in his thirties, ex military, who uses it basically as corporate housing and is hardly home. (so basically a landlord's dream) 

Jim Baer Exactly my thoughts. In fact, that $700 a month includes 8% vacancy, taxes, insurance, capex, and repairs (which like you said, should be low for a few years). I'm honestly more worried that this is too good of a deal that I'm missing something... great point about negative equity, I was considering even biting the bullet and paying the extra, if needed.

Hi all, I'm pretty close to purchasing a property in a nice part of Dallas. It's a small 1 bed 1 bath, only 500 sq. ft. and selling for $85k. The current owner has put almost $25k in upgrades into the small apartment making it an extremely luxurious 500 sq ft. It currently is leased for $1550 a month (fully furnished). It also has a low HOA fee of only $130 a month. Needless to say, when running the numbers with all of my expenses taken out, I'm getting a pretty outrageous cashflow of ~$700 a month with a 25% downpayment. My biggest concern is the fact that he other properties in this complex aren't rented for nearly as much since they sent as updated (or fully furnished). Second, I'm worried the appraised value will come back much lower than 85k since the price is undoubtedly inflated by the rental price. All that being said, the current wants to stay, and others have assured me I could rent it at or even above that price, if he were to leave. Let me know you guys thoughts on a deal like this, it's my first investment, so I don't wanna miss anything. Thanks,

Dan Naughton I also went to A&M and have considered investing in college station. However, not to rain on your parade, but your numbers are a bit optimistic. I ran your numbers through my model including a higher insurance rate and putting 25% down. My estimates show about $300 cash flow each month, but that's with $68k down. This gives you a COC rerun around 5%. If you can get this for less than 20% down, it's not a bad deal, but you're definitely paying retail for this property.