All Forum Posts by: Account Closed

@Account Closed

Hey Hows it going Chris! 

The Maximum allowable offer is based on a formula. Here it is 

[MAO = (ARV x 0.7) - Monthly Holding Costs - Estimated Repair Costs - Transaction Costs]

Also, the purchase price of $2,500 is a typo and is not be factored in the formula above.

I hope that helps..

Thanks for Responding 

A few days ago I was able to secure a contract with a seller looking to get rid of his multifamily home. He's looking to sell due to health issues so agreed to take a look over the property. When I did my analysis i came up with the Maximum Allowable Offer using as listed below. I hope to wholesale this property. 

The owner wanted $89,000 originally but he was willing to accept my offer. I fear that I have offered more than I should have. After looking at the property everything looked great. Only minor issues to deal with (Needs Stove and Fridge in 1st floor unit) and the school district is awesome, one of the top ranked schools in Western PA (South Fayette).  This is a turn key for buy and hold investment. Only thing is that it is not occupied and would need to be filled with tenants. Potential rent you can expect to get $1200 to $1500 per month. 

Would like to get some advice about this deal. What are your thoughts? 

Hello friends!

I have a townhouse in Newcastle, WA that I purchased for $200,000 in 1999. It is worth $400,000 today. The cap rate is 1.68%. My mortgage is $65,000 at 3.5%.

In 2016, my household will earn $160,000.  In 2017, our medical training will be completed and our wage will increase to $400,000.  We have good credit (800) and will likely buy a $400-800k house in 2017. I also plan to buy/open a medical practice estimated at $300k in 2017.  We also have $400,000 in student loans at 3ish%

If you were in my shoes, what would you do?

1) Nothing-- Just keep renting it out and pay off the mortgage.
2) Sell the property and buy 2 smaller properties with higher cap rates using like-kind exchange
3) Sell the property and use the money for student loans, house and practice purchase.

Or something else?

My goals are to maximize long-term value; cash flow isn't important. I do not want to be an active day-to-day property manager, but do like to be a part of big decisions. I am considering getting a realtor's license just to have a better understanding of things and also because of the high amount of transactions I'm going through.

I have analysis paralysis and would appreciate your insights. Please help!

I'm looking at buying my first rental property that was specifically intended for rent (as opposed to my current rental which happened on accident after the crash).

I just want to bounce my thoughts off of BP as a sounding board to make sure I'm looking at this properly.

I have about 50k to spend on a property in a different state. I have a property management company that also has a turnkey service to buy new properties. I understand this will eat into my margins, but I can't see myself flying down to oversee maintenance for a few weeks. 

There are a few houses in this particular area that are selling for about $25k, will take about $15k in repairs to get it in rental shape, and should rent for about 1k per month. The turnkey fee for overseeing construction is 20% of the construction costs (how badly am I getting ripped off there?) so my total cash needed, after closing costs and everything, are about $46k. The ARV should be about 55k.

My property management company has several properties in the neighborhood, and they assure me that they're renting them out for 1k to 1100 per month. 

I estimate the monthly expenses to be about $620, so my monthly cash flow should be $380 a month, or ~$4500 a year, so around a 10% cash on cash ROI. I know that's a little on the low side,

I came up with the expenses like this:

15% vacancy

20% Repairs and CapEx

10% Property Management

$50 insurance

$170 taxes

I know there has been a lot of talk about these $30k houses. The latest podcast had an in-depth discussion about the pros and cons about those houses (@Ben Leybovich was particularly harsh on them), but those they were talking about were renting for more like $500 a month, not $1000.

I was also considering using my money as a down payment and getting a "better" property, but I will be unable to get a conventional mortgage since I've only been self-employed for 8 months (and I need 2 years), and I'm not sure I'm comfortable getting too creative with my financing at this point starting out, especially when I'm looking at a 10% ROI on a turnkey property.

Any thoughts on this? What have I missed, if anything? Am I making a horrible mistake as a newbie, or is this sensible?

Thanks for responding guys. Apparently the vacancy rate for the area is 1.76% so I rounded to 2. It's definitely possible to lose a month from a screw up or a bad situation in which case it would hurt. I currently have the rent rates at the bare minimum of 2300 for the bottom 1br with large backyard, 2100 for the middle 1br, and 2000 for the top 1br. But technically, all the new development condos in the area are priced way higher which should push lower pricepoint minded people my way. And once going, I could probably get closer to 22-2400 for most of the apartments. Which numbers should I be focusing on, the coc? Total roi? I'm not really sure which to use as a minimum % I should hit to decide whether to move forward. And the fact that it might be 200k lower than fair market value, does that justify it if I'm looking at this for a buy and hold?