All Forum Posts by: Mike Moles

That deal looks good to me, assuming all your estimates are correct of course.  I estimate $100 CF per door assuming 100% financing, it doesn't meet the 2% rule but as many are finding these days in many markets that's hard to find. 

It sounds to me like you have done very well for yourself, and you are looking at "retiring" from real-estate and pursuing another career for all of the right reasons.  You are very fortunate that you are in a position to do it (because of your hard work!).  Of course you still need to manage those properties, you don't mention whether you have systems and property managers included in your expenses but once you get another job you may find you need that.  Congratulations and good luck!

So $100 per door cash flow (passing the 50% rule test) with a CoC return of more than a like risk investment is a good deal, and a like risk investment means an option that has similar return on investment volatility.

I'm surprised your lawyer doesn't know who to serve, maybe in this case you need a lawyer that has experience in these areas (not just RE closings).  And a lawyer familiar with these issues might be in a better position to negotiate with the concerned parties.

Have you considered the Solo 401k option yet? I learned of it here on BP and I am considering going that route myself. It eliminates many of the issues with BORSA, ROBS and Self-Directed IRA's that I have read about although you are limited to 50% or $50k (whichever is less) on the loan you can take out against it but it can be used for anything including REI without any restrictions. At least this is my understanding, I just wanted to mention it in case you haven't heard of it before.

Missing CAPEX, Repairs/maintenance and as you said vacancy. Also property manager (or even a realtor to rent it when vacant) if you will end up using one, most say to budget it even if you don't. Excluding the down payment for financing cash flow is negative, how much depends on what these actual expenses will be. Experienced investors say (I'm not experienced) it's not if you will incur these expenses but when and how much they will be. Exclude the deposit because depending on the deal cash flow can be made positive as the down payment increases. Look at Cash on Cash return to evaluate the deal including the cash invested. I'm still learning myself, this is just what I've picked up from BP so take my opinion with a grain of salt!

Great discussion and really good points.  As a newbie still learning and not yet invested I am really trying to better evaluate the more expensive lower cash flow properties vs. the higher cash flow less expensive and lower rental income properties in my area.  I have analyzed dozens of properties currently on the market and I definitely see better cash flow in the lower rental income properties that are typically multi-family.  My concern with these properties is the potential for those expenses that I may not be estimating properly to come in much higher like those expenses associated with higher turnover and potentially higher repair costs due to the fact that most of these properties are older homes.  I understand that using general percentages when estimating expenses as a rule of thumb is necessary to evaluate the opportunity but in the end I'd like to be as educated as I can be and use as much market specific data to fine tune those estimates that I can before I jump in.

Great questions and answers all, lots of good information.  My take away from this discussion and from listening to about 1/2 of the podcasts since joining a few weeks ago is to buy as smart as you can (don't overpay), and even if the market tanks in the worse case you possibly could be underwater for a period of time but in buy and hold scenarios the outlook should be long-term anyway.  And in buying smart you also use conservative estimates for expenses and rental income and with positive cash flow your investment will pay off both in the short run and in the long run while you build equity.  As long as you hold the asset and maintain positive cash flow the investment will pay off.  So as I have heard many times here appreciation is icing on the cake for buy and hold strategies, positive cash flow and building equity is the basis for the investment.

Thanks for starting the thread @Jeffrey Lester , it's very impressive to hear all of the stories of young RE investors, best of luck!

Hi all, just starting out and still learning. I'm in Bethel, CT and my first thought was to invest in my immediate area. I've analyzed some potential investments and without verifying all of the assumptions there seem to be some decent deals. There aren't too many MF's in my area so I recently started looking at Bridgeport, CT. I am somewhat familiar with the area and I know parts can be rough but there seems to be some opportunities. Anyone have experience investing in Buy and Hold properties there? Mike

Congratulations, looks like a good deal! I'm still in the learning mode myself since I just joined a few weeks ago but I will invest in my first one or possibly two properties in about 6 to 9 months.