All Forum Posts by: Rich Lopes

Sleep is like our personality. Everyone has a unique sleep pattern. Miracle morning - yes I remember that and tried implementing it but couldn't after few weeks, I went back to my old habits - but I try & stick to one mantra from his book 'SAVERS'

@Jim Goebel, :D  That's funny how you said the 'prestige factor', and no, that's not my 'need' but certainly there's more money slogging around here in Bay area and probably some of that goes towards purchasing those properties without regard to Cashflow or returns.

@Chris Seveney, I agree. 

But again, my argument is, is there anything on those numbers that anyone could think is wrong to justify otherwise?

Thank you both!

I don't know much about that market but I have worst situation here in my neck of the woods, so I would say 8% cap with 11% COC is much better, but then you have to weigh in other factors and see if you can either increase the COC by lowering cost or increasing NOI thru some value add. Don't buy just because you have to buy.. talk to some pros in your market and see what they think. There are other ways to find off market deals if that is something you can afford to do. Good Luck!

@Jan H. & @Scott Skinger. Thank you both!  Scott, you made some very valid points on why some people would still buy be it because they don't know what they are doing or know more than what we do.

I have been researching many deals in the MF space but every time I run the numbers, I get Cash-on-Cash returns numbers that just doesn't make any sense.  

Here's one deal that I would like to get some perspective from BP community.

1. 10 Unit (mix of 2 & 1 ) in Northern CA
2. Asking Price - $745K
3. Current Avg. Rent: $625 / month / unit
4. Owner Paid Utilities: $905 / month 
5. Assuming Property mgt - 8%
6. RE Taxes - 1.14%
7. Insurance - $2000 / Yr
8. Repairs & Maintenance - 4800 / year (potential, could be more or less)
9. CapEx: 3500 / year (Potential, could be more or less)
10. Assuming - 30% down with conventional financing at 4.5%, I get a COC of just over 1%.

Aside from any upside potential in rents with some rehab, Why would anyone want to buy into this deal from cash flow perspective, or am I missing something crucial in running my numbers?  I have been running into the same dilemma with every other deal I am looking at. 

Is there anything I could do to make this deal work other than offering lower price?

Thanks!

Originally posted by @William S.:

Cash out Refi leaves $0/m in cash flow or negative ($145k ARV). I'd be out of pocket $20k give or take too.

ARV will most likely be higher, but still negative cash flow after Refi. No point in that.

 Agree.. There is not enough room in your cash flow.. Didn't think about that. But if you could use that cash from property #1 and buy another substantial positive cash flowing property #2 which would cover the additional payments + the payment for property #2, that is something you can think about. The net effect would be 2 positive cash flowing properties.

Based on the above numbers you COC is barely 4.5% - if you think that's good enough then make sure the ARV is at or above the $122.5k (87.5k+35k), then it make sense to buy these properties. You can do BRRR and get your cash back and perhaps reinvest - otherwise sell it build some cash reserve and buy one one or 2 for all cash when there is a good opportunity.

Rehabbing is a major endeavor and you have to really estimate at least 110 - 120% of the total rehab cost just to avoid any surprises once into it.

Originally posted by @Jason Sylka:

Thanks again,

@Rich Lopes:Thanks for the heads up. I dunno how that slipped through QA ha. Fixed it up and it should work as expected now.

Is there a code without bugs? :) Works great now! Thanks!

Jason Sylka , 👍 This was my biggest ask since very long time. One suggestion and perhaps it's already implemented but I couldn't get it to work is when I click on the Podcast link that I am interested in, it doesn't open the podcast for me in either Podcast or Stitcher app. Otherwise great tool to have handy.

I agree, investing in Bay area from cash flow perspective with traditional financing is mute point in current market conditions. Appreciation yes, but it's hard to understand how far the Market will rise even further. So the better options are take part of the equity from one or both  your condos and invest in Central Valley/Sacramento or OOS would be a better choice. I wouldn't go the route of selling both since you have probably bought them at the right price back in '12. Good luck!