All Forum Posts by: Michael Wentzel

@Ryan Hollamby I'm guessing the already low purchase prices in Pueblo will dip further in this particular neighborhood. This is why many from the community were arguing against listing the neighborhood as a "Superfund" clean-up site. So you could probably pick-up some deals and you might even be able to find renters. But as a landlord the liability that comes with possible lead-poisoning sent me running the other way.

Mike

Thanks for the input. It good to have a few voices encouraging conservative/ realistic numbers.

Mike

@Warren Foster Thanks for the feedback. When you factor n 20% for maintenance and another 10% for capital expenses to go along with 10% for the property manager and 10% for vacancy, what kind of cash flow do you have leftover? I have read that many investors shoot for $100-$200 of cash flow per unit... but they usually don't mention what percentages they set aside for property management, maintenance, vacancy and capital expenses.

Perhaps in a bit of newbie idealism, I was shooting for $150 cash flow per door, 30% return on cash and 2% rent to purchase price. As I keep raising the percentages I'm holding back, my first two criteria keep falling.

What criteria do you use?

Mike

@George Henson Welcome to Bigger Pockets! I had to look up Blanca to see where it was on the map. I'm living in Colorado Springs and investing in Pueblo. How do you go about purchasing mortgages? Have you done this in southern Colorado?

Mike

@Account Closed You're way ahead of me, so you are probably right and I might learn the lesson the hard way on this one. But it is still early on in my investing career and I'm learning. I wish I had thought of adding meters before the guys were almost through with the work. It's my first multi-family and it is cash-flowing well. So I'll watch it and continue to learn for a while. Hopefully there are no more major repairs on the horizon.

Mike

@Jerry W. The rent values are coming from my Realtor, property manager and my own estimates meshed together. Obviously the property manager's opinion trumps everybody else's opinion.

I'm in mixed areas of a community of about 150,000 people. A lot of it is block-by-block. But this isn't inner city LA or Detroit. I feel fine walking around looking at properties during the day. I talk to lots of neighbors and try to get an idea of the immediate area.

Mike

@Tyler Jenkins If I were you, I would go down and look at the place just for the sake of education. The numbers look good on the property. Hopefully there will be others like it that will come along.

Then I would download all of the BP podcasts to my iphone and get a job delivering pizzas in the evenings. It seems like property prices in your area would allow you to get started with just a small pile of cash, but your pile is too small. Generally lenders are still going to require 20% to 25% as a down payment. So unless you can find a partner, pile up a little bit of cash and keep educating yourself through BP, podcasts and maybe local REIA's.

Mike

Hello everyone,

I ended up leaving all four units on one meter. My property manager says there is a line of people ready to rent the units since we pay utilities. So I didn't think it was worth adding the extra meters.

It looks like the total cost will be between $3500 and $4000.

I was still feeling a little bummed about it. Then my buddy told me tonight that one of his renters lied on her application and apparently was keeping nine cats in the rental. She skipped out and first estimate to get rid of the stench was $14,000. He is going to spend his Christmas break taking out carpet and replacing floorboards with the hope of cutting that estimate in half. Now I don't feel so bad.

Mike

@Aaron Montague The $50 a month maintenance is just taking 10% of gross rents. On one house it isn't much, but across a portfolio it might work. I would be interested in what percentage of gross rents people put aside for maintenance. From the little I've read, I thought 10% was reasonable. Maybe I'm low. The insurance is for standard landlord policy.

@Tom S. This properties are in southern Colorado in a community of about 150,000 people.

In any case, my inspection day didn't go well. We pulled out of the inspection and the contract on the little 2 bed, 1 bath that morning. Apparently the night before the city government had decided to list the entire neighborhood with the Federal Superfund list for toxic clean-up. There had been a "smelter" in the area in the 1800's and some properties had shown high lead content in the soil. It would have been a good deal, but we decided not to purchase a property that might invite lawsuits in the future.

The inspection did go ahead on the house and cottage. It needs $10,000 to $20,000 in rehab to get it rent-ready. So we're going to chat with our lender on Monday and see if some of those costs could be wrapped into a portfolio loan. The good news is that the two units are metered separate for gas and electricity. So we might be able to get it for $30,000 and put $15,000 into it for a total of $45,000. Gross rents without utilities would be around $1000, so it still clears the 2% rule (rent over purchase price).

We'll see how the chat with the lender goes on Monday.

Mike

Hello everyone,

I managed to get two more properties under contract recently. These two will be just my 3rd and 4th properties. So I'm looking for feedback as I continue to learn.

#3- 2 bed, 1 bath single family

Built 1900

Purchase price- 22500

Down payment- 5625 (25% down on 15 year portfolio loan, 5.25%)

Rent- 500

Mortgage- 135

Taxes- 20

Insurance- 30

Property management (10%)- 50

Maintenance (10%)- 50

Vacancy (10%)- 50

Cash flow- 165

Rent over Purchase price- 2.2%

Return on cash- 30%

#4- House (4 bed, 1 bath) & Cottage (1 bed, 1 bath)

Built 1940

Purchase price- 35900

Down payment- 8975 (25% down on 15 year portfolio loan, 5.25%)

Rent- 1100

Mortgage- 216

Taxes- 28

Insurance- 40

Property management (10%)- 110

Maintenance (10%)- 110

Vacancy (10%)- 110

Utilities- 180

Cash flow- 306

Rent over Purchase price- 3%

Return on cash- 37%

The community where I'm purchasing properties is about 40 minutes away from where I live and work. This is the first time I've made offers and gotten properties under contract without looking at them. I'm going down tomorrow to go through both properties with my inspector. The interior of #3 has been updated and I expect it to be rent-ready. I expect #4 will need some minor work to get it rent-ready for renters.

I'm a little concerned about closing on the properties in January and trying to get new tenants during winter. But I think my property manager can handle that.

Any thoughts on these two properties?

Mike