All Forum Posts by: Michael Miller

Howdy,

I am so happy to report that in October of last year, I purchased a 15k 2.5br 1bath home in a rental area near the local university.  It was the most disgusting house I have ever seen.  My team and I removed every wall board and piece of sub floor to reveal joists and studs.  Eventually, we added another bedroom and bath, bring it to a 3.5bed and 2bath with a laundry closet.  I am so proud to bring this home back to life, and add value to the neighborhood.

Here is how the deal worked out by the numbers:

16,200 : Purchase price w/closing costs

   3,300 : Labor

      500 : Permits and such

13,000 : Materials for all new baths, kitchen, roof, plumbing, electric and roof

Final price of 33k.

I am currently renting it for 1000 monthly, for a cash on cash ROI of 21.5%

Also, I just had it appraised at 55k, and my CMA came out to be 52k, and he assessor, who rates taxable value at 50% of actual value, assessed the property to be worth 26,800 taxable (53,600 actual).  The average among these prices being 53,500.

I may be taking out a HELOC on this for great ROI and room to make another deal.

Final numbers:

33,000 investment

7,100 annual cash-flow / NOI

21.5% cash-on-cash ROI (without leverage) could be above 35% with leverage

21.5% capitalization rate

20,500 capital gains potential

Thank you all.  I'll be hiring an attorney to make sure.  These are 'professional' tenants.

Richard,

It is a month to month lease.  So, you're suggesting that I can terminate the lease, giving them 30-days notice?

-mc

I recently acquired a 3-unit building.  Two of the units and the residents living within are great.  One is terrible.  The unit is in awful condition, likely because there are too many people living in the 2-bedroom unit (at least 3 adults and 4 children), and their lifestyle habits have caused them to break something almost weekly (shower mixing valve cartridge, rails, cabinets, stairs, etc.).  To top it off, they leave trash on the lawn, for which I must pay the city to clean it up if I don't get to it first.

Can I simply quit their lease for the sake of renovating the unit?  To me, that is really necessary.  If the city inspects, and they should soon, I'll have so many fines by this time due to the damage wrought by these residents.  Or, should I attempt eviction on other grounds?  Currently, they are late on rent, so it may be that I wont need to worry about this.

Any comments will be appreciated.

-mc

Ms. Wang,

Sorry to hear about the outcome as it was probably as stressful as it was costly.  I am going through my first eviction now, but before this circumstance I found, as many on this thread have suggested, that making very clear the ramifications of eviction can help.

In two previous cases, I found that the document linked below probably helped in bringing the residents to pay prior to having to start the eviction process.

https://www.thelpa.com/free/eviction-letter.pdf

Cheers,

MC

I was just mulling over this question in my mind as I've finished the demoing process for I 4/2 I just bought, and am preparing for the rough carpentry process.  

Honestly, I think selection and ease of access (location and layout) are more important than a 10% difference in price.  

Thus, I'll choose Lowe's most of the time, as they tend to carry less low and high-end products, and a great variety (at least the stores do in my area).  Menards is a good choice for some items for which price is more important than style or perception, like flooring, lighting, and lumber.  For example, I have begun shopping for PEX plumbing items, and it seems Lowes has a great, fairly priced selection.

FYI: all USPS change of address envelopes contain a 10% coupon for one entire order at Lowes (http://lifehacker.com/5873141/get-a-bunch-of-free-...)

Best,

-MC

I calculate these expenses very conservatively, but I will share my ideas to add to the pool.

Property Management 10%

-industry standard seems to range 2+/-% around 10%.  To be sure, just find out what the rates are for well-reputable companies in your area.

CapEx 1-10%?

This is going to vary widely depending on age and condition of asset, as well as for how long you'll hold it.  You'd better do an assessment of the condition of and when you are likely to replace and for what price the following capital goods: roof, drive, furnace, a/c, water heater, stoves and other major appliances, etc.

Vacancy ~8.3%?

This will vary depending on local rates.  Sometimes this information can be found online (e.g. http://www.city-data.com/housingDir2.html), but this data is difficult to trust.  This is the type of circumstance under which thorough knowledge of your investment's locality is necessary.  This is especially true in cities where there is demographic segregation by income, race, or occupation.  For example, in a university town in which the student body is rising in population (these figures are very easy to find, my hometown for example: http://ro.umich.edu/enrollment/enrollment.php), you may lower your vacancy rate.  If you are buying in a location where you already have assets, I'd suggest just gleaning a percentage from the average of your assets and applying that to your new asset if it is of a similar type.  Me, personally, I calculate one month per year, which is 8.3%.  I do this because sometimes turning the apartment takes time, sometimes finding a tenant seems easy, but then the tenant backs out, etc.

Maintenance 5-10%?

Again, this will depend on the age and condition of your asset.  Also, another key factor is your access to a handyman and/or trusted contractor.  Without these, you may want to estimate a high maintenance cost of about 10% as hiring 'experts' a la carte will likely be less cost efficient.

At this beginning of this year I decided to get back into real estate investing.  My goal was to buy two income producing assets before the end of the year.  Now I have done that.

In April I bought a 4-unit fully occupied, and I conservatively estimated it would produce 1000 each month.  It is producing 1300 to 1400, but I haven't had any cap-ex yet, obviously, so I think my figures were just about right.

Just last month, I bought a townhouse near the local university campus.  It is producing 200 a month just as I expected.

I'm happy that I made the right choice to return to investing, and I am pleased that I was able to reach my goal early.  Maybe I'll have a third deal before the year's end.

Thanks for reading.  Best of luck to everyone.

-mc

The tables disappeared after I posted this. o_o