All Forum Posts by: Don Nelson

Great ideas on both counts.  It's just too much to give my opinion on how to accomplish what you want in this thread.  Keep digesting info and seeking education until you feel comfortable.  As for me, I focus on C class properties in south KC and along the Troost corridor also (redevelopment happening and a lot of investor money going in between the highway and Troost, north of 80th St).  My buying criteria is a value add model, seeking at least 1.4% rent ratios (monthly rents are 1.4% of my all in number).  I'm accomplishing this by purchasing homes from $30-$70K, doing rehab and renting to stable tenants.  My expenses are:

1 month vacancy divided by 12 months

10% repair and maintenance per month

Taxes/Insurance

I don't pay utilities and never buy something that's not separately metered. I do my Capex work up front so don't do reserves on that. I buy, rehab, and in most cases refi within 4 months and leave an average of about $5k in the property, earning $200/door minimum net cash flow. So, on $5k investment, I'm getting ~50% ROI. In some cases, when I refi I actually get money back and get infinite ROI.

This is definitely not the only way to do it and many will have different ideas out there.  but so far it's working for us and we are clever in lease structure so our actual repair/maint is more like 4%.

Hope that helps.

@Micah Hensley, I'm just shooting in the dark here but it sounds like you're prioritizing drive time and convenience over the investment perhaps?  I own 20+ houses in the KC area and none are in Lee's Summit because I can't make the returns my model demands.  However, it's a great area for long term appreciation potential.  Everything depends on what you're trying to accomplish - you'll have to provide a lot more info on what your goals are, when you want to achieve them, how you're buying, how you're exiting, why, etc. if you want actionable advice.  

That said, there is plenty of opportunity to use leverage and market intelligence to get near infinite returns using the BRRRR method. Please fill us in a bit...

@Phil Kessel - I had only visited a few times. As we begin to look at deals, I would ask the agent or wholesaler all the reasons why they thought it was a good deal and about the area etc. after a while common themes started to emerge. Combining that with data analysis on line got us started.

@Phil Kessel I've heard there's redevelopment plans through the Troost and Paseo corridor.  I have had good luck so far investing in Raytown, Independence, and South KC/Grandview.  You can use Neighborhood Scout to get a crime map of the areas.  Mostly, that's a good way to know where to avoid.

@Jaysen Medhurst - $42K because that's the market/comp value. We got a nice off-market deal. What do you do for Capex? Our thinking was we pull out cash on the refi and keep ~$3k in reserves for Capex per property. Management is exactly $80 per door. Water/sewer is paid by tenant. My lender allows an 80% LTV on both purchase and refi. Thank you! I appreciate your comments and hope my bases are covered.

Hey Fellow MO Investors:

Wanted to share some specific info in this post as I've been doing analysis and don't want to have my head in the clouds, as I'm out of state. Below you will find a deal analysis that is typical of what I'm finding and buying in KC, MO. The plan is the BRRRR out there. The purchase looks what's below. This is a B/C class Grandview home. Of course, cash flows look great.

Here are the numbers on a refi which I can do 6 months later, if I want to pull ~$10K out:

This looks like a really good strategy to me - to use my cash, do a deal, pull out the cash (and then some) and continue to roll forward.  So, can you guys tell me what I'm doing wrong if anything?  I have a pretty good manager on the ground and a crew that she's vetted.  Rehabbing one deal right now that seems to be going well.  

Any sage wisdom/words of caution?  Thanks in advance.

@Asim Zaidi, I've been in the Colorado investor market for a long time.  Right now, auctions are crammed with people over-bidding properties because they don't know how to buy safely.  If you are not careful, you can easily get caught up in the hype and over-pay.  In addition, the Denver market if extremely competitive with good properties have multiple offers, driving up purchase price.  This market is very hard to flip in and make a profit right now.  Contractor management is a serious problem with prices very high.  I say all of this because if you've never done a flip before, you definitely should mentor under someone before jumping in.  LOTS of risk in this market right now.  

I don't want to create fear or negativity, but please be sure you know the numbers and you have a very solid crew/team you can trust before taking the risk.  Several ways to mitigate the risk would be:

1. Do the work yourself - don't know if you have that option, but it would save a ton of money and headache.

2. Use your own money - if you pay cash for a property, you don't have the pressure of a timeline and interest payments and you can have more breathing room to do it right.

3. Know the market - you don't want to buy on the higher end of the market right now.  Things are slowing/shifting, and the high end is the most risky sector with the pickiest buyers.

I hope you find this helpful - would love to hear how you move forward.

@Craig Ts - most banks take between 3-5 weeks depending on if they order an appraisal.

@Kyle Doney - Thanks.  Looks like that's probably who we're going with.

OK