All Forum Posts by: Michael S.

@Jane Trust Ryan - congrats on your purchases.  What zip code(s) are your properties located?  Based on your comment, are you having issues with getting them rented?  

@Nikki Yankowski

Interesting.  Let's explore the example you gave a little further for educational purposes. 

So let's say the purchase price is indeed $252k.

20% down, 30 year fixed rate loan at 7.5%

Monthly payment would be $1,410

Property Taxes would be at least $2000/yr given that it is not homesteaded - so at least 165/month

Insurance will be around 80 to 100/month - we'll say 80/month

So we are now at 1655/month before vacancy and capital expenses.

You quote renting to a Section 8 tenant - I'd add $2400 in cap ex per year then.  That's another $200/month.  

Now we are at 1855/month.

One month vacancy per year.  That will cost at least 2179/year without including utilities.  So at least another 180/month.  

Now we are at 2035/month.

You quote $2421 on Section 8 rent - that seems really high to me for Section 8 based on my research, but let's go with it anyway for this example.

10% to property mgmt - another 242/month.  

So let's see what the net looks like:

2421 rent - 242 (prop mgmt) - 2035 (expenses as outlined above) =  (+) 144 / month.

So, Nikki proved me wrong - you can find a positive cash flow property with 20% down assuming the rent amount of $2421.

As such, this could be a possible play for a new investor who is looking for solely hands off  turnkey. 

Now, that said, let's give the contrary view, and why I wouldn't personally do that deal:

-Limited appreciation potential for at least 3 years on this property based on location and demand, and no opportunity for forced appreciation

-Risk with Section 8 on cap ex 

-I look for cash neutral on 15 to 20 year notes

-positive cash flow of 144/month does not excite me, especially since I prefer appreciation potential 

-I avoid rentals that require more than $2000/month in rent to work given lack of demand at that price point in North Alabama

Again, I ran this example just for educational purposes.  Do your own due diligence and don't take my viewpoint for your own investment strategy.  

@Chris Seveney - my guess is either a cease and desist letter or threat of lawsuit for slander.  But I am not a lawyer, and I didn't stay in a Holiday Inn Express last night.

This thread is a shining example for two of my, and mine alone, personal viewpoints:

1. Why I personally choose not to invest in ANY syndications whatsoever (TO BE CLEAR, I am not specifically referencing or referring to any of the named individuals or syndications in this thread whatsoever, nor am I specifically referencing a syndication company with the name "ANY" in its legal name). Obviously, there is risk with any REI. But, if I lose money on deals, and I definitely have, it is my sole fault for either getting the numbers wrong, or things going sideways with rehab, or the market changing while rehab was in progress. So I blame myself and move on.

2.  Why I choose to not reveal my legal name to the general web forum world - those I have done deals with, or worked on deals with, who are on this forum know who I am and that's enough for me

@Jim K. - I absolutely enjoy real estate.  It has the enjoyment of a hobby, but I also treat it like my second career/job given the amount of time and effort I spend on it.  But it can not replace the income opportunity my primary job creates;  plus, I use disposable income from my primary job to fund my real estate investments.  

"Ultimately, does anyone really ever set out to do real estate as a minor part of their life's ambitions and succeed in it as a side hustle that they spend a carefully limited amount of their time and energy on?" - the answer is yes, that's exactly what I am doing myself.  

@Shakil Ahmed - would stay away from MFH in Huntsville right now - market is saturated with them at high prices.  You're likely better looking in Birmingham right now if you want cash flow.

I mean, we get tornadoes here for sure.  I was here during the 2011 tornado outbreak, which was pure chaos (google "2011 tornado outbreak" if you're curious).  Just like Florida gets hurricanes, California gets earthquakes, and the northeast gets ice storms.  Not sure what information you are looking for with this question. 

@Mohamad Guene  Simple answer - you will be cash flow negative, and your appreciation will be limited.

We did a new build once for a rental - it performed miserably cash flow wise despite a great location and property - we ended up selling it 3 years later.

There are very few new builds in Huntsville proper - are you referring to an outlying area like New Market or Meridianville?

I will give you the simple answer - you are unlikely to cash flow whatsoever on a turnkey property in Huntsville or Madison right now unless it is in a C/D neighborhood, and/or you plan on putting more than 30% down.  

We just sold a turnkey for $200k.  It should rent for around 1500/month.  The investor that bought it from us paid cash.  So they will cash flow - but that's because they effectively put 100% down.

We have two more turnkeys listed on the MLS right now for under 250k in good areas. But unless someone puts down at least 30% on the purchase, they won't cash flow.

@Rachel Hadass - here's my thoughts on your questions:

- What areas have the highest tenant demand and why? What are the demographics (eg, mostly families, young professionals, etc)?

Downtown Madison (35758) will always have enormous demand, but the area doesn't cash flow.  Huntsville proper under 1500/month has high demand as well in either good neighborhoods and/or nicely updated properties.  

- Are there certain areas you would stay away from and why (eg, high crime, bad schools, poor quality builds, etc)?

Not really, although the area around Pulaski Pike has some rough patches

- Would you recommend trying to rent to Section 8 tenants? If so, are there certain areas that would work best?

We have never done section 8 rentals, so I have no experience to comment on here.

- Where are the areas with the tightest inventory?

-Madison proper, and the nice areas of Huntsville (Jones Valley, Blossomwood, etc) - simply because the numbers don't work well in these areas, limiting rental supply.  

- Are there areas that would work well as a mid-term or short-term rental in addition to long-term?

STRs are now forbidden in Huntsville without proper zoning - and they have been enforcing it. 

We tried two MTRs and lost money - won't try it again.  

@Tim Porsche - disclaimer - I know nothing about Pennsylvania real estate law.

That said, I don't see any recourse for you here on this issue, as they would likely argue that you had a chance to do your due diligence before writing the offer and/or could have written a due diligence period into the contract and chose not to.  

There is only one time we did not close on a house we had under contract with a wholesaler - this was due to a title issue, and we received our EMD back because the seller/wholesaler ultimately could not uphold their end of the contract (inability to deliver the property).

 1.  Answering any post that starts with "I have one million in liquid cash and not sure what to do with it".  

2.  Putting "Columbus, OH" in any part of their post.

3.  Answering any post that starts with "I want to start investing and have no money".

4. Continuing to interact with posters who have no experience in REI, yet tell the experienced investor they are "wrong" or "old school" in their investing strategy.

5.  Conversing with any poster who is new and tells us how "great" their mentor program is that costs $20,000.