All Forum Posts by: Thai Tang

Thai Tang has started 5 posts and replied 20 times.

Originally posted by Kirk B:

Originally posted by Thai Tang:

Thanks for the advice guys, I don't know how "solid" my plans are but I do have short term goals and a 5 year goal, but thanks for pointing out the tax benefits/penalties, I need to look more into that. My short term goals are to make money via Speculation and my 5 year long term goal is to have many rental properties for steady income for my parents and siblings, my original approach was to start off with SFHs, recycle the profits to buy additional SFHs to fund the rental investments later down the road. My biggest challenge about the goal planning is to decide how much I want to make, haha but I do expect at least 30 cents return for every dollar I put out.

Thanks again for the kind advice guys

-Thai Tang

Thai-

I do not invest in Real Estate for speculation. However, I think speculation is more of a "gamble" then the cash flow model. There is no way to be sure that your house will be more valuable (particularly within 5 years). Speculation is really for those with a lot of experience, deep pockets, and patience.

For me, the cash flow model of buy and hold landlording is the best choice. Part of my model is to ignore the listing prices of a property and focus on the relationship between gross rents and purchase price. This way I know with reasonable certainty that I will make money every month on the property. Read the section "Rental Property Questions & Landlording Issues."

I completely ignore tax implications with my business model. I ignore Cap Rates. These, along with many other "approaches" I feel are designed to make unattractive properties look good on paper.

I once read a book that said the best way to determine the purchase price of a rental is to look at the listing price and then offer 10% less. I actually bought a property based on this advice. I was fortunate. The property I bought actually has some cash flow. Most often this isnt the case.

For me if I were to look at the two choices in your first post for purchasing:

SFH
Gross Rent (GR): $1,100/m
Cash Flow (CF): $150/m ( for sfh. this is my personal goal)

Calculation of max
payment:
Max. Debt Service = 1/2 Goss Rents - Cash Flow
Max DS = $550 - $150
Max DS = $400

So the maximum monthly payment is $400/month.
Using YOUR financing options find your maximum purchase price. For me thats 7% for 30 years $400/m = $60,123.03

Duplex
Gross Rent (GR): $1,600/m
Cash Flow (CF): $200/m ($100/door in multi family is my personal goal)

Calculation of max
payment:
Max. Debt Service = 1/2 Goss Rents - Cash Flow
Max DS = $800 - $200
Max DS = $600

So the maximum monthly payment is $600/month.
Using YOUR financing options find your maximum purchase price. For me thats 7% for 30 years $600/m = $90,184.54.

To summarize:

SFH: $60,123.03
Duplex: $90,184.54

It will probably be easier to find a 2 family for 90k than a SFH for 60k. There are a lot of details to this as well. The max price must include fix-up and closing costs. The utilities must be tenant paid (except for water/sewer). And other rules. This is what works for me.

Good luck!

P.S. You are thinking to yourself, "I cannot find properties this cheap!" I bet you can, and this is part of the hard work that goes into successful landlording.

Hey Kirk, I was going through some numbers and I can't seem to figure out how you get the results you do with the maximum monthly payment, can you or any one else reilliterate that.

- Thai Tang

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whew, good thing I found BP or else I've would have made a great deal of mistakes and may not have even known what I've done wrong. Thanks you guys very much for the insight. I need to reevaluate my plans. Maybe buying a $30K property with $600/month rent will be a better start for me.

-Thai Tang

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ohhh wait, am I leaving out the interest on the loan? If so then I will be losing about $200/month!!

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hmm, I don't completely understand your math but I'll look into it. I am not "strapped for money" and I don't have or looking for investors so that's why I concluded why SFH is better for me because they sell easier, but given your insight I may reconsider. The main question I have is that isn't your cash from kind of low for the SFH. Here is how I have it broken down, but I know there is something I'm missing.

$100k @ 5.5%, 30 year term, ~$580/month mortgage
rent - $1100/month
property tax - ~$1100/year
home insurance - ~$1000/year
water - ~$40/month
sewage - ~$60/month
property management - $110/month (not going to hire property management yet but some time in the future)

with that I get $135/month cash flow, without property management $245/month cash flow

what am I leaving out in my math?

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thanks for the great insight, I'm sure it will help me along my way

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Thanks again for the kind advice guys

-Thai Tang

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I've been doing a lot of research and looking at a whole bunch of potential property I want to buy but I am at a cross roads about what kind of property I should buy for my first investment property.

I am pre-qualified for a loan for $150k with 25% down and still have additional capitol for minor repairs. I've been thinking about the potential month to month income that comes with duplexes because I can buy a duplex for the price of a single family home and I will have two rental incomes of $700-$900/month for each section of the duplex, BUT if I buy a single family home I can rent it out for $1000-$1200/month and when the real estate market gets better I can sell the house and get a lump sum of additional capital for investments.

I guess my main question is which is a better route for my first investment property, duplexes for the 2 for 1 rent income or single family homes because they will be easier to sell when the time comes?

Thanks for your time,
Thai Tang

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thanks for the warm welcomes

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Originally posted by Dan O'Connor:

Welcome aboard, Thai!

My 2 cents... like in poker, luck has little to do with swinging solid deals. Understand that most of CA hasn't bottomed out in pricing yet so be sure your numbers are tight before pulling the trigger.

For example, if the local market corrects down to yr 2000 prices and you buy a deal at 2004 prices...not really much of a deal.

Bottom line, take your time to learn your market so you'll be able to spot solid deals when you see them.

Be sure to check out the various forums, search the archives and ask questions!

thanks for the tips :D

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Hi every one, my name is Thai Tang from Elk Grove, California. I moved to California from Texas 5 years ago to pursue the fantasy of playing poker for a living, at first it was rough but then it was GREAT!! But recently it's taking a toll on me psychologically and I'm wondering if gambling is really for me but either if I keep playing poker or not I need to find something more productive to do with my earnings. I've always been interested in real estate and I actually got a real estate agent license when I was 19 but never had the drive to do any thing with it, so now I feel like I owe it to myself and take a gamble (a calculated gamble) in today's real estate market. I am ready to soak up any information I can find and hopefully I can apply it to my new venture. Wish me luck!! And I hope to be learning from the lot of you here.

Thanks
Thai Tang

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All Forum Posts by: Thai Tang

Thai Tang has started 5 posts and replied 20 times.

Post: help me get started, please!

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Post: Hey y'all

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