All Forum Posts by: MATT WARDEN

401(k) is an expensive deal. You will be charged normal income tax for the withdrawal plus a 10% penalty if you are under 59 1/2, which I assume you are. Do you really feel like risking a 40% premium?

Seems slim. I'm ignoring your "total expenses" figure because I don't know what you factored in and didn't factor in.

NOI: 50% of gross rents = $1375/month
Mortgage: 30yr@7% = $1100/month (assuming no PMI)
Margin: 1375-1100 = $275/month or $55/unit-month

Hi Keith,

I am from the Fairfield, OH area, about 35 minutes south of downtown Dayton. If you are still looking for people in the area, let me know.

Hello,

I am interested in getting into rental properties. I'm 23, recently graduated from Miami University in Oxford, OH with degrees in Psychology and Systems Analysis, and currently work as a technology integration consultant for one of the Big 4.

(The 70 hour weeks done in 4 days and the "work hard, play hard" lifestyle are not exaggerated.)

I want to finance my investments with the income from my day job, and slowly transition to real estate investment full time (and I do mean full time). I get paid well. More importantly, I think, I am positioned very well for this endeavor because I have no real expenses myself. I have a corporate apartment that the firm pays for. My meals during the work week are more than covered by per diem. I have a company car. Et cetera. Cash flowing in, very little flowing out. To me, this equates to very low risk for RE investments, as I could always cover mortgage payments of vacancies as necessary.

My long term goal is to accrue properties that produce enough passive and active income that I can do RE full time and/or only do technology work only because I want to. (My short term goal is to con MikeOH into doing a full brain dump which I can then upload into my higher level cortex.)

I learned a lot of what I know about tech (the practical knowledge anyway) from online discussion lists and forums. I'm finding a similar source of info here at biggerpockets. Glad to have found this community!

Disclaimer: I am new to this and am responding mainly to see if MikeOH or others tell me I'm missing something in my calculation. So, please, do not go off my analysis...

Based on the numbers you quote, it looks like a good -- but not amazing -- deal. You have expected cash flow of under $50/unit-month. If you raised rent 20%, I think you'd be hovering over the $50/unit-month mark.

Basing this on:
NOI: $525/month
Mortgage payment: $350/month
Margin: $175/month or $44/unit-month

If I were looking for my first deal and I came across this deal, I would probably take it. There seems to be enough room to make some mistakes and still not be in high risk of getting into trouble.

Then again, if you are having a PM company handle the property, there will be a limit to the experience you'll gain from this deal.

No idea how you're figuring this. You are acting like there would have been no risk with the deal and the $8000 was a given. If that were the case, the OP probably would have acted on it. The deal was high risk due to the slim margin, and that's why he passed. IMO, he did the right thing. In fact, I am quite impressed that he passed (assuming he made the decision and the deal wasn't killed by the investor). It shows reason winning over emotion, which is 90% of the battle for most people.

I think we should be very careful about suggestions we make to newbies. "Don't worry about profit on your first deal" seems like a bad suggestion, because some unfortunate newbie might actually listen to that advice. Your attitude is right: don't let yourself over-analyze out of fear, and miss out on deals. But that is a far cry from "don't worry about profit."

I am also in the custom software development industry (although the consulting side) and am looking to get into rental properties.

Hopefully others with more experience will chime in, but I would caution you in regard to your timing. While there is always somebody predicting a crash, there are a number of people who have some pretty convincing arguments (based on fundamentals) that real estate will enter a significant decline in the next 1-3 years. In fact, many suggest that the decline has already begun and point to data to back up this suggestion.

Check out the "is there a real estate bubble" thread elsewhere in these forums.

I am personally strongly considering waiting 1-2 years to try and catch the market after it has fallen.