All Forum Posts by: Sharon Rolel

I'm looking at this building, ARV (though I plan to hold) is 750k, needs 100k at least (150k pessimistic est), and the seller is down to 425k (mortgage is 410k which I will assume, though I will have to pay back some of it to make it 65% ltv). It was built in the 1920s, needs windows, roof, and units rehabbed. Renting on average 600 (tenant pays utilities) with 25% vacancy.

The area is a very nice heritage neighborhood with 800k mansions a stone's throw away, though the immediate area is cheaper, 200-300k and also has some mansions converted to apartments. The city has virtually no real crime, there hasn't been a murder or even manslaughter for years, assaults are very very rare (even though city is 200k, metro 350k pop) and their idea of a crime spree is a couple guys stealing ipads and purebred puppies. However, employment is high and the city had negative migration for the past couple of years because of it. Vacancies have been close to 15% at one point, at 8% now, still abnormally high, which is why this kind of deal is possible, the rest of Canada is mostly comically expensive. Schools around it are nothing special, it's right on the border between 1 better and one worse district, sadly it is technically in the worse district, but the high-school is good and there is a french-immersion school which is also good.

Apartments are 13 2 bedrooms, 2 1 bedroom, and 1 bachelor, which can easily be made into 15 2 bedrooms. I have been playing the renter for a day and a lot of apartments I called had already rented, and ads are at most a week old in a considerable radius around the property.

Comps are at least 700, can get to 800 with the rehab. My ARV is based on 10% cap after using 50% rule, which is more than what people are getting so it is conservative.

The property has been losing 40k a year for the past few, but has improved recently (I suspected he had apartments rented at the cost of tenant quality just to sell but the leases seem fine and are they same he had always used).

My only concern is the thing's age. Structural damage etc. I'm sure there are experts in the area here since it's such an old neighborhood in general, but if there are some specific things I should look out for, I want to know before having an accepted offer and getting it inspected.

Dale, not sure where you are coming, the guy is asking for thoughts on the properties like many have done before him and is what the forum is for.

As to the properties, I can't do much more than recite the what the common sense of BP says (which I agree with) - "read about the 50%/2% rule. These properties will bleed money."

I have properties in Canada and the USA and I live in Israel. I own several free and clear SFHs (the dirt cheap kind) for which I have a management company and I believe they are doing more work than they should, but am still making a good return. I am flying there soon to straighten things up.

I have a few condos (each of which is worth much more than the SFHs combined) which have appreciated at 7% a year over the past 3 years, I saw little to no cashflow from these but expenses were HOA+taxes 100% of the time, never had to lift a finger doing anything.

What I'm trying now is to find people to JV with or join funds and syndications who are very specialized (basically doing what I would do on a larger scale if I had the time, experience, and funds), rather than a REIT or something. They allow for some diversification and use of far greater experience and knowledge. I try to be as involved as I can rather than an armchair investor, I go to the properties and I do exactly what I would do if I was going in solo. I also use these opportunities to learn from the people running the venture as much as I can, about the area and about REI in general.

if you stay in one area and don't have the means to invest elsewhere then you are bound to it, for better or for worse. If you can get to know the right people in several markets you will be much more dynamic, and less prone to the whims of one single market that you happen to live in.

I use this:

http://compareschoolrankings.org

They have a google powered map for ratings, but mostly for Canada. Maybe you can find something like this in the US..

Maybe it's time to raise the rents, Rich

Let's take exhibit A:

A SFH bought for 100,000$, rented for 20,000$ years, brings in 10,000$ a year for a 10% cap rate. If you put 20% down, finance the rest with 30 years amortization at 5%, this translates to 24% COC. This is how it will work for 30 years if nothing changes. After 15 years you would have paid back half of the loan.

Exhibit B:

the same SFH bought for 100,000$, rented for 20,000$ years, only now it's 15 years amortization. CoC is 12%. Only now you would have owned the house after 15 years.

If you reinvest the net income, turning it into compounding returns, it grows exponentially extremely fast. assuming you can keep reinvesting it for the same returns, 12% after 15 years is 447%. 24% after 15 years is... 2419%. Also, if the house appreciated 50%, in the second scenario you would have made 50,000$, 50% of the equity you have put into the house. those 50,000$ are 111% of the equity you would have had if you used 30 years amortization.

So assuming these (perhaps unlikely) conditions, after 15 years you would have:

15 years amortization: 150,000 in the house, 110,000 from the compounding cash flow = 260,000 gain.

30 years amortization: 95,000 in the house, 500000 from the compounding cash flow = 595,000 gain.

Just to show you the power of cash flow and compounding returns.

You can go to the latest post in the thread by clicking on the arrow right next to the time of the last post, other than that I don't know.

Rich Weese, even if I were to pay the equivalent of a small downpayment that they charge, it's still a logistic mess.

Sam Sagor, I see your conference ticket and raise you another one, plus a modest bribe.

10 thousand miles :(

I own 2 condos in Toronto, one of those I am selling now. I put down 90k and am selling 3 years later for a return of 170k after sale fees. By selling I mean it's listed, and there have been 5 viewings in the first 2 days so I hope the price is right. I have seen basically no cash flow from this one.

@Aaron, I also own SFHs which are managed by a management company, and I can't see the difference between that and HOA, as far as headaches go. The fees for the condo were 30% of the rent, and include everything except taxes which are another 10%. The rest I (well, the bank) have been pocketing for 3 years, only other expense was doing some touch ups for 3k to prepare it for the sale.

I would say it was a success. Appreciation was I would say 7-8% a year and the mortgage rates were 3% for 2 years, 3.8% now.