All Forum Posts by: Ralph S.

He was recently in Milwaukee and his infomercials were on a lot. I found it interesting that all the "testimonials" were from people who hadn't made a cent, all they had done was buy a property and claim it was worth so much more than they paid for it, so they had "made" all this money. Not one that I saw had actually sold anything. Why can't people see this crap as crap?

In order to consider renovation costs in your pricing, you need comps that are in better condition. You don't have comps at all. I think you're thinking of is the more common approach of using 70% of market, less renovation = price. Without comps, you can't work out that that equation. Besides, what good are comps in this situation? The property is distressed by both having deferred maintenance AND poor management (aka high vacancy), and it's only going to get worse over time.

You might try looking at duplex comps, any 2+2's and 1+1 duplexes in the area? What you describe, two buildings, is really two duplexes anyway.

IMO, the value of a property is related to the rents it receives. Not sure what you intend to do with it, buy and hold, fix and flip. Don't know what the area is like, or how many other investors are talking with the executor or how badly the executor just want's to get this steaming turd off his plate. Just too many variables to consider.

But, if you're the only one, and the executor is motivated, and the rents are at the low end for the area, you might just reach for the gold ring. Offer 20k each unit (or less). Say the garage under the 1 beds offset no garage for the 2 beds, so same price per unit. $80k (or less), and considering their poor condition and the unlikelyhood you'll find another investor even interested in doing that much work (provide him with a long list of repairs)...you never know. I'm sure I don't. A couple paragraphs in a thread don't make a plan, and I know nothing of the area or this property. But, I'd like to hear what you decide and how it turns out for you.

Use the 2% rule on the back of a napkin. I've never cared for comps on quads, too many people pay too much which is why they get in trouble. Value it based on the monthly rents.

450+500+600+600= $2,150
$2,150 * 50 = $107,500

Course, if the two 2 beds are unrented, you'd have to believe their stated "$600" rent, and if they all need some work, I would start somewhere south of $107.5k. But, not given anything else to go on......

I think you're over thinking this, Bryan.

Nobody can accurately predict 20 years of inflation, your income increases (or decreases) or how much will be available when. That $25K/year in benefits, 22 years down the road, may only be worth $10K/year in today's dollars.

And, if it is a tax deferred program, like a 401(k) or traditional IRA, that 10% penalty is after a 28% tax rate, so it's 38% off the top if memory serves.

It's all a crap-shot. Ask anyone who'd like to, or was planning on retiring in the next 5 years what's happened to their 401(k) or IRA in the last 5 years. Ask anyone who has retired in the last 5 years why they're working that part time job. You never know. The chances that you'll even still be with the company in 22 years is slim at best.

And lastly, listen to Bill.

Does this new friend pass your screening? Were both of the original tenants on the lease? Don't focus just on the cat and leave other important questions unanswered. Hate to find out the one who left was the responsible neat freak and the one moving in is an unemployed slob.

Inside cats can be worse than inside/outside cats. And, all cat's aren't created equal. Shorthair/longhair makes a big difference. Besides the potential damage, there is the shedding, fleas, etc.

The simplicity of "No Pets" works for me. End of discussion.

Start here, Jake

http://www.city.newport-beach.ca.us/EconDev/Rental%20Requirements.pdf

Screen like never before! My best, and worst tenants have been S8.

Besides a lesson on not closing until vacant, the only other value of this thread is the birth of a new forum term:

Babiaking

Couldn't agree more, Stan. I dunno how he does it.

I side with everyone who's responded so far (you have to fix it), but in response to:

I look for longevity, more than 2 moves in 3 years, not really interested. And, I ask when they are filling out the application if I can see where they currently live. Their response to that question is usually enough. If they get alarmed, so do I.

Man finds it difficult to sell 300-foot NYC ferry he bought to convert into a waterborne dorm.

http://www.msnbc.msn.com/id/42396304/ns/us_news-weird_news/

I'd need way over 100 units if income and shedding my W2 income were the goal. :goofy:

Think about it in broader terms. You'd not only have to replace your spendable income, (after tax, so start with your gross income), but then you'd have to replace your benefits, health insurance, contributions to IRA/401(k), etc. Then the number of units you would need grows considerably. You'd need 30 units just to cover the monthly health insurance premiums for a family of four (medical, dental, prescriptions).

The $100 per door is just one segment of the 50% Rule of Thumb. It is a quick and dirty method, if done accurately, to indicate whether or not the purchase price supports an investment likely to provide a positive cash flow over a long term holding period. There is nothing in that rule that you can take to the bank, and it's not a case where "your results may vary," it's a case where "your results WILL vary."

If you use the 2% and 50% rules of thumb in evaluating price (and there is a lot written here on BP), you'll find that all too often prices and "cash flow" in the retail market are defined as Rents less PITI, a very short term possibility, but a certain long term cash loser. And this is a prime reason why the majority of people who invest in real estate fail from the beginning by paying too much.

It only takes one bad tenant, a long vacancy, a roof, a furnace (you get the idea), to wipe out years of supposed cashflow at Rents - PITI.

If you're considering a buy and hold strategy, real estate is a very long term investment, and buying at a price that at best, suggests a positive cash flow is critical. But so it your ability to manage and sell that property.

After purchase comes the management of and eventual exit (sale). Your ability to be successful here is also a key consideration, IMO just as important as the purchase price rules of thumb. You can buy right, and stil fail.