All Forum Posts by: Jeff G.

Just because someone else is stupid doesn't mean you are missing something.

The cap rate and cash on cash are horrible.  I wouldn't have given this house a second look unless it is going to appreciate dramatically in the next 5 years....  

I mention early in this thread the circumstances of my 38K purchase.  Well my realtor called and said she felt obligated to tell me that a large investor whom owns over 100 units in my target market is offering me 5K more than I paid for my property if I sell it to him prior to my closing.

I of course said no, but it felt good that an investor of that caliber wants my property that bad.  It's definitely a confidence booster that I am making the right decision and have a great opportunity for my first investment property!!

I factor 10% repair 5% vacancy and 5% reserve. It would still cash flow with a property manager however my business plan does not incorporate property management until I have a bunch more units. I do however factor it into my calculations as I always want to be conservative in cash flow projections. 

I was networking with a realtor hoping to start investing in June of this year when she said she had a widower who's husband owns 20 properties and is dumping them after his recent death 2 months ago. Assessed value is 54k, neighbor hood is B for the town, three blocks down the road are 500K houses. The neighborhood is one that you have very nice homes mixed with duplexes and rentals.The city is starting to run a tight ship with making land owners keep their properties looking nice.

House was built in 1884. The owner took very good care of his properties, this was his nest egg. I looked at several of his single family houses that all looked good but I am only in the position to purchase one right now.

 LOVE THIS QUOTE

Im closing on a deal:

Purchase Price 38K (30K mortgage)

Fully Rented with rents of 995/month (total) long term tenants one 6 years the other 2 both are staying. I think I can edge these up at lease renew in may by $25-35/unit

roof, separate electric, windows and furnace are new

taxes 1400

Location: Sheboygan WI (north side, which is most desirable)

I show a cap rate of 19.6%

CCR or 70%

Positive cash flow of $5600/year

I figured 10% maintenance, 5% vacancy and 5% reserve in my numbers.

I'm not trying to challenge a seasoned investor.  I'm trying to learn as a newbie if I am grossly missing something here.

While that may be the rule there has to be exceptions.

Take the scenario that a house is 30-40K has brand new roof/windows/siding and furnace along with updated electric in a class b area for the city its in. This has to be looked at differently than a 30K junker that needs a ton of work and has deferred maintenance does it not?

In my market most duplexes are 30-60K and its in a lower income city with no 'ghetto' areas.  Just low paying manufacturing and service jobs.  Rents are in the low $500's pr door for a 2/2 duplex.

If you are buying and most of the work is already done for you I dont see where the huge loss comes into play.  

Please educate me if I am wrong.