All Forum Posts by: Nathan Emmert

Richard, it sounds like you're still a bit confused on how to do analysis.  I'd recommend some more reading before you dive in too far.

As others have mentioned, 50% has nothing to do with debt servicing and frankly it's not something that you could violate if you wanted to... it is just what it is, a rule of thumb.

It's a useful quick analysis tool, but nothing beyond that.  Older homes with deferred maintenance will go way beyond 50% given constant repair costs.  Homes in NJ will go way above 50% cause 25% of their rent goes straight to property taxes.  Areas that make you pay floor or hurricane insurance are probably above that estimate as well.  If you pay utilities or have high water costs (like I do in Utah, 10% of rent just for water/sewer/trash) you can stress the number.

On the other hand, if you have low property taxes (about 5% in Utah) you might fall below it.  If you can get a commercial insurance policy and have enough units to get the property management down a few points, you might beat 50%, etc etc etc.

For quick and dirty, it's useful... but at the end of the day you need to dive deeper.

I'm just worried with the phrasing of your post that you don't necessarily understand all these numbers.

2nd Monday of each month... so yes, this coming Monday the 12th.

As for a flip seminar... I keep seeing something on Facebook but I'm not looking to spend a weekend being told I should be paying for the next seminar where they'll REALLY tell me what I want to know :)  I'm also a buy and hold investor... so while I'm curious about flipping to myself (enough to invest in J Scott's book), I'm not in the market for flipping seminars at this time!

If it were a commercial property (5+ units... or more typically apartment complexes), you'd likely get that.

Down at residential properties people don't tend to bookkeep as well, especially the small time landlords.

Take a look through the expenses... especially repairs and CAPEX. If you see a lot of big repairs, the bones of the building may not be good. If you do NOT see CAPEX, then there is probably deferred maintenance (could also be seen in high repair costs... even bandaids cost money!).

In the financials, take a look at the vacancy rates.  It might be somewhat indicative of the previous managers (low rents = low vacancy some times, etc)... but it can also give you a feel for how desirable the area is (market rates + high occupancy = good rental area).

Beyond that, dig into the income and the expenses a little. Are the rents at market rates or can you adjust them? Are they paying the right amount for insurance, grass, snow, etc or can you get better rates shopping around (bumping up NOI)?

The last thing I look at is things like price/unit, etc.  Frankly, if it's producing rents at 2% of purchase price... I think it's a great deal... but I always have to remind myself that if everything else in the neighborhood is being bought at 3% rents... I'm probably getting ripped off.  Obviously it's wise to look at comparable properties (the banks will prior to lending you money anyhow) to see if you're getting a fair price, or better, buying equity with the purchase.

Subtract your expenses from your income... set aside a reserve for periodic things like CAPEX... what's left is cashflow.

Sorry, asking a vague question and all you're going to get is a vague and snarky answer.

What specifically are you trying to understand?

Welcome... there's a meetup in Grand Rapids on Monday at 6pm... Buffalo Wild Wings in Wyoming.

Kalamazoo still seems pretty depressed to me (my wife works down there)... I like Grand Rapids... helps that I live up this way too :)

Flipping is a job, buy and holding is a more passive income stream.

Flipping while working full time will be challenging.

Buy and holding WITHOUT working full time will be challenging (they'll want to see the W2 income).

To me it comes down to how you want to increase your returns in real estate.  Both flippers and landlords tend to target distressed properties.  Flippers add value through the rehab, landlords through stabilizing the units.  Flippers get to build making their money at the end... landlords get to shop making their money at the start.

Given my career, family, etc... I prefer the shopping route :)

You can make a $25 donation to certain charities/organizations and become a member at Navy Federal... so no, it's not just military.

They will also (apparently) do cash out refi's/HELOCs as a second position on NOO properties... honestly a bit surprised more investors aren't using them... must be some downside I haven't heard about yet.

Looks very solid... I would advocate for separating out the expenses so we can make sure they pass the sniff test but the top level numbers look solid.

Why is your cash in so high?  25% of $70k would only be $17,500... where's the other $8,500 going??

My leases generally say any late fees or other fees are collected first when payment is received.  The tenant wouldn't be owing me a late fee, they'd be owing me rent and you could post eviction notice.  Additionally, if they only pay rent the following month, that payment will be late as the first monies received would satisfy the prior month's rent and leave them short incurring another late fee.

Being a down stairs unit will always make it harder to rent as people always assume the noise from upstairs will be worst case.

Being near the road is convenient but noise comes with that... I think it balances out from a rental point of view.  Are there any safety concerns that would keep renters with kids away?

Dumpy units attract dumpy tenants... if you want good tenants, the place needs to look the part.  Good people don't generally rent bad units.

The heat situation is strange but could be priced in.

My feeling is if you can't fix the noise issue, it won't effect getting people into the units (show it during the day when upstairs isn't occupied) but you'll likely have tons of turnover as people will grow tired of it and leave.  Fix the issue and maybe require the upstairs tenant to have 80% floor coverage with area rugs to reduce the noise further.

Musicians and others may look for cheap places but the rents you're talking about don't sound cheap (and frankly it's too large to be "cheap").

Is a 1% dumpy rental the best you can do in the Nashville market?  I don't know the market but doesn't sound like a great deal.  Getting in cheap at a low interest rate is nice and makes the numbers work a bit better but this sounds like a hit batter at best... I'd aim for a single or a double for your first intro to investing.