All Forum Posts by: Nathan Emmert

Not sure on #1... don't believe there is any law against it on #2. 

Depends entirely on your market.

In D class or worse areas, you might buy that property for $30k... in A+ areas it might be $250k.

Do enough searches on Realtor.com or Trulia and you'll get a feel for the standard going rate of purchase price to rent amounts in a given area... from there you can decide if you're getting a good deal or not.

Cash on Cash is the key metric most buy and hold investors are targeting.  Everyone has their own personal rate of return ranging from 10 - 15%... to over 20%... to infinite for some investors depending on their strategies, backgrounds, areas, etc.

Generally speaking... putting 25% down on a conventionally financed property that rents for 1% of purchase price will break even give or take... if it rents for 2% it has a very nice CoC return.

Nope.

Even a 2% property would only rent for $96k a year... assuming 50% expenses (which could be low in an area that generates 2% rents) would yield $48k of profit assuming you bought in cash... Given that you are looking to put 20% down (you won't buy an investment property for 20% down, 25 - 35% minimum on multifamily depending on residential or commercial).  But assuming you did 20% down and financed the remainder at 4.5% interest you'd throw another $10k of "profit" towards the loan leaving you with $38k a year.  Still a great return on an investment of $80,000 but not what you posted.

In this case, it's generally referred to as uncollected rent.  You'll have vacancy where no one is paying rent... but you'll also have lost rent from people not paying while getting evicted, or tenants that get behind a little but are working with you.

Talking to my PM... in rougher areas, Class C, the loss factor with vacancy adds up to about 20% on average across the country.

Sorry Alex... can't give you an entire education for free... you're going to have to put in the time to go through these forums and learn. If you don't understand LTV you shouldn't even be thinking about investing yet. You know how I said you were trying to run before you walked... seems like you're trying to run before you are even able to stand.

Eh, it's about as helpful as the 50% rule...

Generally speaking, I'm looking at the rent ratio to purchase price to help drive what the CoC will be when comparing properties in a concentrated area. In the same market, things like property taxes, vacancy rates, insurance rates, etc are all likely to remain proportional. If both properties are priced at $100,000... the one that rents for $1,800 a month is likely to be a better investment than the one which rents for $1,600 a month.

Now comparing a $100k property that rents for $1,800 a month in Michigan versus a $100k house that rents for $1,600 a month in Montana is a completely different story.

 Except it's not random... it's based on Government studies of rentals across the entire country.  There's nothing random about it, it's a statistically based number.

I use Wave... works great for me from a purely accounting point of view.  I made a post a couple months back about how I set it up.

 The value is the unknown.

You cited examples of reality... very little of which you knew going in.  Did you know tenants would always stay 3 years and that you'd have very low vacancy for example?

Generally speaking, if you're looking at a property and it's showing expenses of 25%, the 50% guideline gives a new person a basis to believe that number probably isn't the full story.

There is no perfect, there is no way to know everything, this is just a nice, easy, straight forward starting point.