All Forum Posts by: Rhondalette W.

New member here.I’ve been learning about and following the real estate industry for over three years now and am trying to get my feet wet.Currently have an offer out on the following property – plan to buy and hold for 3-5 years, and do considerable renovations during that time.The numbers seem promising to me, but I would like to hear your opinions!

Details:

Property type: Duplex in high rental demand area in Los Angeles Price: $530k Up front investment: $80k down payment + $20k renovations Rental income: $3800 / month* P&I, Tax, Insurance, Trash/Water/Sewer: $3050 / month Vacancy Rate 2% ($75) Repairs 5% (~$200) Property Management 6% ($230) (already verified rate with company)

Net operating income: ~$250

*Note that I would be living in one of the units.That unit would go for $1600 if I were renting it out.Since I will be living there, I only want property management services for the other unit, reducing PM fee to $130.Likewise, I don’t see why repairs on the other unit would exceed an average of $100/month.That brings net income to $450 monthly.A little fuzzy since I’d be paying half of the “rent” for my unit but to make the point…

To put it another way, living in one of the units and renting out a room, the rent from that room plus the rent from the other unit cover P&I plus trash/water/sewer completely.So I would go from paying rent north of $1k per month currently to ~$500 per month to cover property management fees and maintenance.Depending on the state of the market, I plan to sell within 5 years or hold and purchase / move into a second property?

How does this sound for a first time investment?Good, low-risk starter opportunity or do I have rose-colored glasses on?

I am not sure that I follow all of your numbers here. It looks like you will come out of your pocket with $80K down and $20K in renovations, so you are in for $100K right? Do you know what your return on investment is ? Have you considered managing the other rental yourself? Your vacancy rate, repair rate and PM rate seem a bit low? I typically see 10% for each of these categories. Also, will the rent from the unit almost cover your unit or will you have to pay each month for your own unit? Sounds like you are paying $1000 a month to help cover expenses? Is the $250 net operating income after you pay $1000?

0 Votes

Originally posted by @John McConnell:

So I guess my greatest fear is not making the numbers work on paper so that I don't get a good deal. I want to try to at least cash flow out the gate but for whatever reason I can't seem to make the numbers look right. Maybe I am being too cautious in my calculations. Some of these properties are from people already using them as full rental properties. I want to own/occupy my first 3-4 plex. I'm not really too worried about the financing or any of that other stuff...not scared of jumping out of an airplane so jumping in head first into real estate shouldn't be that bad. I just want to make sure the numbers jive before I pull the trigger. I am ready mentally to start just not comfortable with the calculations yet. Maybe I just need to find a wholesaler who has something that works...let them explain it to me... And just grab if it's in a good neighborhood and passes a GC inspection when it comes to the structural and important stuff. I'm not so worried about cosmetics either. I can fix or have that fixed after the fact. So do I keep crunching until I have crunched 100 or so properties? Then narrow to 10 and 3 and then buy 1?

Sounds like you are a real numbers guy? Are you making any offers? I made 2 offers this week. After running numbers if you find a deal that works you have to make the offer. I may not actually win the 2 deals that I made offers on but I think If I make enough offers on the good ones eventually one will get accepted. One of the offers I made this week was $10K less than the asking price, house needs a little work but not a major reno. So sometimes you may need to offer less to make the numbers work for you. You have nothing to lose by making the offers. Luckily I have found a realtor that doesn't mind working with me making several offers when the numbers work. Another thing that I am learning about numbers is that some of the "rules" that you read about do not have to be perfectly met such as the 2% rule could actually be the 1.5% or 1.0% rule and you can still make out okay with cash flow. So, don't let the numbers stop you. Get as close as you can to the rules and make lots of offers.

3 Votes

Originally posted by @Mark W.:

Fear!

Fear of failing, the unknown, which way to go....

Walking out on thin ice holds me back.

I have become comfortably numb in my career. I am trying to correct that.

Mark, I was stopped by fear for many years sitting on the sidelines dreaming of jumping in. The best way to overcome fear, in my opinion, is to find a live mentor. Find a local landlord or flipper and ask them if you can treat them to lunch and bring a list of your fearful questions. Tell them your goals get their opinions. I finally jumped in after finding 2 live mentors one guy from my church who owns 50 properties and is a contractor and another guy who is a real estate professor at a local college. I have never taken his class, instead I take him to lunch once a month and bring a list of questions. This may sound strange but I think these experienced folks simply like sharing their experience and knowledge if they know you are serious. Mentors are all around you find one and get over that fear. I finally did.

3 Votes

Cash is King? or Is Cash King?

If Cash is truly king, trying to build up a good amount of cash reserves is my biggest issue. I know there are no money down strategies, private lenders, bank loans etc. But would rather have cash purchases instead of tons of debt. Maybe, I need to change my thinking but waiting to build cash reserves slows down my business.

1 Vote

Originally posted by @Spencer Iveson:

Hi there, i just want to thank everyone in advance for your responses. Im in need of advise and would like to get as much information as possible to help steer me in the right direction.

Im 26 years old, currently unemployed, and due to the sale of a family business that i inherited a good portion of, im going to be getting a large sum of cash. Dont want to disclose any exact figures but bc im asking you for advise ill say its in the ballpark of a half million dollars. Ill let you all know what my plan in my head is as of right now. I live in upstate ny. Im not necessarily set on buying property in this area but i am leaning towards it. I want to buy a one family house for myself, obviously id like to get as good a deal as possible bc i will be paying cash. Also i want to purchase a multiunit building such as a 3 family house or slightly larger. Thats all i have thought out so far. Ive done researxh on foreclosures and property taxes in the area which are fairly high but i dont know where to start and im not sure if this is the best route i should go. I dont have much interest in putting any money into the stock market maybe a small amount(im meeting with a financial advisor next week). I know that. very fortunate to be in this situation and i want to make the best of it and not just live off the cash but to build on it. I feel as if investing in real estate is a lot more of a tangible investment than stocks as well. Any imput at all would be very helpful. Thank you for youre time.

Wow Spencer you are in a very good situation. We all envy you. Make sure you get educated in whatever area you choose. I would not recommend turning your funds over to a financial manager or advisor. I believe real estate is your best bet vs. Stocks or other investments. You mentioned that you are unemployed, do you plan on starting your own real estate business? My advice is to start small and learn as you go along. Find a real estate investor mentor in your area. You could possibly buy a 4plex multifamily unit and live "free" in one of the units while the others are paying your mortgage and while you are learning the business. You have so many options available to you.

Here is my advice:

1.Protect your money (do not turn it over to strangers to manage for you)

2.Go slow (do not rush into making financial decisions)

3. Get educated (BP is a great place to get started.

http://www.biggerpockets.com/real-estate-investing

4. Find a real estate mentor (once you are knowledgeable partner on deals)

Just my thoughts- I am no expert.

1 Vote

Originally posted by @Wenhao Huang:

I'm a 19 year old on a U.S. Territory I currently living by by myself. I don't have any money. But I want to know what I must do to start off

Hello Wenhao, I recommend that you start by reading the Ultimate Beginners Guide. Here is the link:

http://www.biggerpockets.com/real-estate-investing

Good luck getting started.

0 Votes

Originally posted by @John D.:

Would you mind sharing the address or neighborhood? I'm intrigued! Lived in Baltimore for years.

@bob craney

This is an amazing rehab! I use to live in Baltimore and I believe that much of the city needs rehabbing. If you can do this type of work you could revitalize the city all by yourself. What were your numbers for the rehab? To answer John D's question about location this how looks like it is on the corner of Augusta & Walrad. Glad it is cash flowing for you. Congrats!

0 Votes

Originally posted by @Ken Cooper:

@Dawn Anastasi they are both 21 and the arrest was a year and a half ago.

I personally would not rent to such a young couple with a record. It sounds like you have already accepted deposits though? If the property is in a decent neighborhood and you think you could get better "more mature" "non-drug using" tenants you should pass on these. How long did it take for the property management company to find these folks? Ask them to present at least 3 different tenants prior to making your selection. I am no expert on out of town property management but I would pass.

0 Votes

Originally posted by @Mark Hutchins:

Hello

I am new to this site, however not new to real estate (18 years and counting). I currently own, manage, some real estate as well run a note brokerage firm (we purchase mortgages, contract for deeds and other types of notes both performing and non-performing).

I Look forward to sharing my experiences as well as learning from others. For example here is a tip I learned from a experienced landlord as I was just getting into rentals. When interviewing a perspective tenant do a home inspection and check the inside of their fridge (most perspective tenants who know you are doing a home inspection will clean the place up, however will not to think of cleaning their fridge). If their fridge is clean and no mold is growing, you will have a tenant that will usually pay on time and not tear your place up. :)

Welcome to BP Mark. Thank you for sharing your tip on interviewing prospective tenants. I hope no one ever looks in my fridge. Glad they didn't look in my refridge to qualify me when buying my current residence or rentals. I would have never qualified....lol

0 Votes

Originally posted by @Vonetta Booker:

Thanks, everyone! In terms of the numbers, I purchased at 120k, about 75k in rehab, ARV about 255k.

As far as the timeframe, it went about a month or so over the original 3-month timeframe mostly due to weather delays for the kitchen addition (needed because of the original REALLY funky layout), lol. Just certain things I learned from & I'll be tweaking to ensure the next flip runs smoother & more quickly.

Wow! I am impressed. I have never tried flipping but you make it look like "fun". Nice work.

0 Votes

All Forum Posts by: Rhondalette W.

Rhondalette W. has started 20 posts and replied 352 times.

Post: Analyzing 1st investment - Los Angeles Duplex

Post: What's holding you back in your real estate investing career?

Post: What's holding you back in your real estate investing career?

Post: What's holding you back in your real estate investing career?

Post: Young and looking for advise..

Post: I don't know how to start off

Post: Monster 4 unit rehab in Baltimore City

Post: Would you rent to these tenants?

Post: New Member from Peoria IL

Post: 1st Flip Finally Finished!