All Forum Posts by: Michael Randle

So I think your vacancy of 3% is low. That means if someone leaves on the first of the month you will have the same unit, turned around and rented by the 12th.

Electricity of 1%? I guess this means every unit is individually metered and you are counting only your unit? Same with water and sewer at 2%? If that is the case I think you are good. If it is owner pays utilities you might want to adjust those numbers.

I do not know what the property list price is (if it is even an on market deal) but a purchase price of $725k then $80k in repair, yet you stay at an ARV of $725k? Must be a really good reason you drop that $80k into the property then.

No money set aside for CapEx, if you really are planning on keeping the place for 10-15 years you should start to put something aside.

Quick google of Carlsbad CA rent says a 2bed should rent for ~$2,100, so why only $5k in rent?

It seems your Cash-on-Cash return is horrible, but I hear that is expected in most of CA (if that is where this is located). Is this a house hack or 100% investment? If you are using this as a house hack and to get your feet wet in REI in CA, I am not super impressed with any of the numbers. But you are breaking even (or potentially), you will learn quiet a bit, and you will be staying at a place for free.

Personally, I am not overly impressed by the numbers. And that is purely from a numbers point of view. But if it is an AMAZING property that you are going to be living in, and having other people essentially paying your rent forever then I can see the draw and the reason you might want to go with the property.

https://www.redfin.com/NC/Durham/1212-Park-Ave-277...

I think I need to coin a new term for this sales pitch.

 I do not know if I should feel insulted or complimented by that comment.

@Account Closed, The situation you presented is usually why people start in REI as a part time gig and keep their full time job. That way even if you make 'only' 20k in 6 months, which by the way is 1/2 of medium household income in Holiday FL, that 20k is like a bonus half years wage just dropped into your account. You then take the lessons you learned in your first deal, and the extra money you saved up from working half the year, and invest it into a second. etc etc.

Eventually, if you budget right, you will have enough to fund 2 flips at a time. etc etc.

From a strict supply side economic view it means (all things equal) you will be able to demand less rent for any SFR you purchase. That isn't to say the PRICE of SFR will go down, although it might due to the tenants and problems that come with apartments, but it might make your margins a little tighter.

I do not know the net migration patterns for Orlando and the driving economic force, and even if I did (or anyone did) you are really just making an educated guess one way or another. Sometimes they are more obvious and sometimes they are not.

My best guess is that when the complex opens up, it will probably drive the market rents for the immediate area. So if it is going to be a truly luxury apartment, you are golden. If it is going to be sec 8...well...yeah...

I guess my question would be what expense is pushing the difference of $300k between your seller and your mentor? Is it just taxes? Is your seller basing his price only off of a cap rate for the building? If so what is that cap rate that is agreed between Seller and mentor? 

At 8% Cap, 100k per unit asking price you are looking at a difference of 120k NOI vs 150k NOI. Are property taxes going to go up 30k a year due to this sale?

This is probably me being a beginner but it seems like the math isn't working out 100% and something else is missing in this equation. But of course I could be wrong.

But back to your question on what to do, why not use actual expenses minus sales tax, and put the future expected sales tax if the property is sold as list price and base your price off that? In the end you should do what the seller wants to do. It is his money and his business, present your case for a lower price but in the end put it up to him.

Hello Everyone,

My wife and I are coming into some money due to us closing out our re-estate with our move. As such we are weighting our options as what to do with our cash. And while kicking around ideas HML came up. So I want to put some questions to the community, from the lenders point of view.

Now mind you these are going to be rounded numbers, and in no way reflective of the real world. I am not looking for detailed annalists around my numbers but the thought process behind them.

How does a HML protect their investment? I know you want to evaluate the property, the potential ARV, the applicant etc. And I did stumble across a HML that does the loan in multiple payouts depending on the stage in which the rehab is in. I also know the higher % is suppose to be the built in 'buffer' for loan default. But do any HML go further, as in securing a second lien against primary residence or other investment properties? Or as a HML do you just rely on your due diligence and knowledge of the area/property as your safety net?

Do you generally charge a higher % depending on the property and the level of work required? Example, do you charge perhaps 10% on a 100k loan that has an ARV of 130k, perhaps they buy the property for 80k and then drop the other 20k to fix up? And then perhaps 15% on a 50k loan with a 80k ARV, 10k for the property and then 40k in improvements?

What happens when someone eventually fails and you need to move forward with legal action? It seems (at least for the most part) the only money you could recover is that which you could get out of the property. This sort of loops around to the second lien on primary residence or other properties. What happens if you sue, win, and then they declare BK? It would seem to me as a lender you are just out of luck. Which is why I suppose some HML stagger the pay-outs?

I guess the fundamental question is how a HML covers their butts, I know banks do it with just sheer amount of loans, but as a HML you do not get the numbers cushion. And it would seem to me lending anything under 14% would be a risk not worth taking since the stock market itself is Y-o-Y at 14% return.

I love these types of questions. You can see the different styles of management and different business policies of people on here. Just goes to show, different strokes for different folks. (Wait...can I not say that anymore? Did someone get offended?)

@Stuart Crowell, I am currently divesting myself from the Denver area due to real work (gasp my 9-5) taking me out of the state and me not wanting to be a long distant landlord. I personally liked the area of tower and iliff out in Aurora. Hard to find a deal, but you can at least request higher and more stable tenants due to the 'cherry creek school district'. Houses are all built around 1980 with no HOA and still can see pride of ownership in all the neighborhoods. My biggest profit is going to come from a house I own off of Chambers and 6th. Right on the 59-mile trail. Walking distance to Aurora CC, no one behind the home, in a very small sub-division.

For someone like me who does not do REI full time it is hard to find those below market deals for the type of parameters I am looking for and sticking too. I am sure I could have made more money if I was going about a more risky approach, such as grabbing up a few of the run down houses up around the VA and the hospital up there. They where 2/1 that you could get for around $160-$200k built in the 1950s. Convert/add on and make it a 3/2 for ~$75k. But at the time I did not have the capital to go that route. Plus for the first year or so they wouldn't cash flow and you would be then playing the appreciation game.

It does seem that in Denver area unless you have like $300k liquid it is hard to get into the true pure investment property play. At least with any quality deals. That is why I mainly built up my little portfolio with house hacking and jumping around.

I know when I was looking at buying my first property in Denver back in 2015, I was finding 4-plex, 2/1 built in 1960 and they where going for the low low price of ~$800k. Granted this was close to DU or cherry creek, but even then I was questioning how you break even and not be forced to play the appreciation game only.

After that I just stuck with SFR. So from an amateur I would agree with your findings.