All Forum Posts by: Peter Mckernan

@Joseph Jones 

Sorry for the confusion. I live in Newport Beach, and invest in the Inland Empire. When I mentioned being in your area I meant the local Souther California are. We're only about 30-40 minutes apart and in real estate as you know that is basically right next door. 

I'm glad you made the move back to this very nice area of the country! California should treat you well and I wish you the best! 

Peter 

@Joseph Jones 

Great to hear your full length story! It's really good to hear about that type of life experience. I'm in your local area and I invest in buy and hold property with a partner. The property is in the inland empire and we're able to manage it on our own. 

I don't know too much about wholesaling, but I wish you the best and if you need anything let me know! 

Best of luck!! 

Peter

Hey Stephanie,

So there some schools of thought on this topic and I believe Podcast 37 goes over it as well; however, you want to keep money in reserves for maintenance. While calculating your operating cost you should factor in vacancies, maintenance, insurance, taxes, and PM (if not doing it yourself). 

If I were you I would work on the rain guards first since it's the middle of the summer and the fireplace will be the last thing that needs to be used. It is also a lower cost and you can save to a good amount for the chimney. 

Below @Jon Holdman explains the 50% rule and the 2% rule.

"The 50% rule (expenses = 50% of gross scheduled rent, expenses mean actual operating expenses, capital expenses, and vacancy) is discussed in several other recent posts, so I would rather not take up that subject here.

The 2% rule (rent must be 2% of the purchase price) has several assumptions. One is that it tries to get $100 per unit. It assumes SFR type financing (e.g., 30 year note, not 20 year.) For a 30 year, 6%, 100% note, it is exact for a $25,000 unit that rents for $500/month. Expense are $250/month, payment is $150/month, leaving you $100 cash flow. At 7% loan rate, it works for a $30,000 unit that rents for $600/month.

With a 7%, 30 year loan, for a $100,000 house, you only need $1525/month in rent to get the same $100 in cash flow. That's 1.53%.

If you go to cheaper units and lower rents, you need more than 2% to get the same $100. Your rents average $412. Take out 50% for expenses, and you're left with only $206/month NOI. If you want $100 for cash flow, that leaves only $106 for debt service. That will cover about $16,000. That's a rent percentage of almost 2.6%. At 8% and 20 years, you can only cover about $13,000"

That was an example given by @Jon Holdman 

Hope this helps @Stephanie D. 

Peter

@Jasmuniqueine Bryant 

Welcome to BP!! I first started in real estate with no experience at all and no real estate knowledge. I recently took some classes through Allied Real Estate School. These classes were online and pretty cheap, and the classes I took made me eligible to take the California Real Estate Salesman Exam, which was my goal. (Disclaimer: I'm not at all affiliated with Allied and do not profit from recommending the company). 

What I'm saying is you don't need any type of experience, or background to get into real estate. Just jump in and take some classes later down the road if you want, or if not, you still have BP! 

Good Luck! 

Peter 

@Marcus Auerbach 

I don't see a problem with that at all; however, I would make sure that they understand that they'll be held responsible for any damages to the property while moving the pool table in and out of the house. I presume they probably know that along the lines of the security deposit, but maybe you can write up a small addendum for the contract to make sure there isn't any ambiguous situations pertaining to the pool table that will be a new house item.

Peter 

@Jeff Heflin 

Congrats on the new digs! I hope that the flip goes smoothly and it sounds like you have a good strong grip on the knowledge for the flip! 

Welcome to BP! I know you'll find everything on this site that you are looking for and more! 

Peter 

In my eyes this question makes a person answering it dig deep. To breakdown this question I believe that there are a lot of motivating factors in life that inspire people in different ways. These ways are things that people believe will help them live a fruitful life. The factors that motivate me for a fruitful life are pursuit of happiness, safety, and passion; which are all encompassing. 

While I don't believe money creates a happy life, I believe that being able to provide for a family and not have to stress over financial responsibilities is happiness. By pursuing a financially stable income stream reduces those financial stresses and helps a person enjoy life with their family. I see the benefit in investing real estate and the aspect that it could benefit my family and me in the long run in motivation.

Safety falls into making sure that a my family and possessions are secure. This can be found in a nice community with a low crime rate, good schools for your kids and prudent local laws. These can be reached by becoming successful in a profession and capture the income that can place my family and myself in these areas.

The last motivational factor is my passion for real estate. I have a full-time job that holds my main passion; however, I have a good amount of time off and can't seem to stop moving on my days off work. Throughout this extra time off I found another passion of mine, which is real estate. It is easy to get distracted by different things throughout life, but this is another true passion of mine that I have come to find out. This gives me discipline in my finances and has shown me that people can be very imaginative in their investing. 

Thanks for your time and also thank you for asking the question!

@Sharad M. 

Peter 

@Simon Campbell 

Put the perspective of cash flow in the best terms when he talked about making sure that you have covered the 50% rule, or move on. He also talked about making sure that you shoot for $100 a door or more! Sound advice. 

Returns can also be talked about by the 2% rule; however, in a lot of areas there really isn't a possibility to get that type of return. I currently don't look for that, so I would say that the 50% rule (that's what I use) is a safer bet in real estate buy and holds. 

@Phillip Gonzales 

Mysmartmove.com works pretty well! I have used it before on one rental, which went smoothly. 

I would take a look into some parts of Yucaipa, Highland, and I would say Redlands; however, the parts you would look for a house in Redlands at that price wouldn't be good areas. I can kinda give you some more insight if you send me a PM. 

@Shane W.