All Forum Posts by: Kristopher Hanks

@Kenneth Garrett Not bad. I think you already found the one constructive criticism, which was offer less on the property. But $15,000 in equity is not too shabby after the rehab. I would take $15,000 in equity and over $400 per month on a deal any day. 

@Steven Caligaris Your numbers look pretty close to me. On a 2 unit I would want at least $100 in cash flow per door, so I think these numbers work. Your Cap Ex in on the conservative side unless you know of major repairs that are coming up soon. I do single families and I fix them up before I rent so I usually do 5% each for vacancy, repairs, cap ex. But if you are aware of a major repair coming up in the next five years like a new roof then setting aside $300 per month is probably a smart thing to do. 16% CoC return is pretty good.

@Jonathan Ruiz Bad!

@Nicholas Judd When I talked about 1% I mean for example: You purchase a four plex for $100,000. I would at the very least want the rent from all the units to equal $1,000 per month total. @Daniel O. makes some very valid points that you need to take into consideration. I like cash flow so I am willing to go into lower end neighborhoods. All three of my rentals in Cleveland are in less than desirable neighborhoods, at least for my standards. But that market has thousands of people that have rented their entire adult lives so they are used to living there and paying rent. All three of my rentals follow the 2% rule. I get about 2.5% per month on my properties because of the areas I chose to invest in. I took big risks, but they are working for me. 

I will give you an example of one of my rentals so you can see what I mean. I bought a house for $12,500. Rehab was $13,500 plus about $500 in closing costs. I am in it about $28,500. I rented it in 2 weeks for $725 per month. $725 divided by $28,500 = 2.544% per month. Those are the kind of properties I like. I invest for cash flow. Higher end neighborhoods you invest for appreciation and a little bit of cash flow. But they are not for everybody. The 1% rule is something that would be a good deal in an A or B class neighborhood. 

Disclaimer, again I do not own any multi-family properties so there is a lot more that goes into them like Daniel said. You need to know who pays the utilities on those properties. That could eat into your potential profit really quick. 

@Nicholas Judd Welcome and enjoy the real estate journey. There are many experienced Pros on here that will chime in at some point. But here are the basics to account for.

Property taxes, Insurance, Capital expenditures, Simple repairs and maintenance, and Vacancies in the other units. My minimum rule of thumb would be a 1% return per month on investment. That means that the rent you collect each month is at least 1% of your purchase price. On a four plex I would want to cash flow about $200 per month per door. There is a lot of math that goes into such a purchase. But I know experienced investors on here have templates they like to use. There are also the BP calculators that you can try for free 5 times under tools. I suggest you attend all the webinars that this site has to offer. They will at the very least open your eyes to how much you have to learn so you don't get burned on a deal. I will leave it at that and let the men and women on here that actually own four plexes give you some more information.  

Fortunately I am in a situation with my one section 8 rental that if they reduced rent in the future I would still be profitable, according to Boris' example of a hypothetical $200 cut from a $1,000 rent. However, I would definitely review my stance on having any section 8 properties if the cut was significant enough. 

@Dan Marzec @Joseph Catalino I will give out the basics in this post. I can talk over PM to give out more in depth details. 

I found a house in the 44120 zip code on 146th Street. It was owned by an exhausted Australian investor. The last tenant destroyed the place, poor property manager. There were roaches all over the place and no one wanted to touch the property. I saw that it had been on Trulia for over 180 days. It piqued my interest because I am not afraid to handle a project. I ran the numbers twice and decided on an opening offer that completely offended the Seller's Agent. So I knew I started with the perfect opening offer. I told both my agent and the seller's agent to present the offer or I would report the seller's agent for not doing his job. I put in an inspection clause and went and looked at the property. I then told the seller's agent to get a counter from his client, I have cash and I am a serious buyer. We ultimately made a deal when the owner sent his counter. This was my third rental in the City of Cleveland. There are still many opportunities there and I will buy more when I can. 

3 bed 1 bath ranch style built in 1960 with 2 car detached garage.

Quick look at the numbers:

House listed for: $15,000

I offered: $8,000

Purchase price: $12,500

Low end remodel, rental grade materials: $13,500

All in cost was: $28,500 includes closing fees

ARV: $35,000

Rented for: $725 per month

CapEx/Vac/Repairs: $108.75 per month

Insurance: $70.61 per month

Property taxes: $54 per month

Property manager: $50.75 per month

50% rule: $362.50 per month

2% rule: 2.54% per month

Monthly cash flow: $440.89

20 year hold estimated gross profit between: $115,000 to $120,000 conservatively 

I forgot to add in the City of Cleveland's annual rental registration fee of $35 per unit. 

@Boris Peyzner I am not worried about it. If section 8 starts to pay below market rents then landlords will simply not participate in the program. When a housing shortage for section 8 becomes a problem then they will have to do something to curb that issue. I don't think that is what happens though. I think they will cut the number of families that can participate. My market has people on a waiting list to get a section 8 voucher. So unless it is cut 100%, I don't think it will become a problem. 

@Billie Miller Nicely done! And I agree I will never do a deal with inherited tenants again. I have had a really bad one myself. 

@Chinmay J. I would form a new LLC with both of you as members. The % split you guys decide, I'm not touching that. If you want it to be a long relationship that is the best way to protect both of you. Then if the venture fails you just close down the new LLC and you can still use your other LLC to continue doing your flips.