All Forum Posts by: Robert Leonard

@Domenick Llanda welcome to BP! Just to clarify, are you looking to buy this property as a flip or a rental? Your analysis shows it as a flip, but with no repairs needed, I'm not sure I see/understand the value-add component. Why/how could you demand more for this home than the individual currently selling it?

Robert Leonard

@Adam Wallen For this property, your vacancy seems a bit low for my liking, but the rest of your estimates seem okay. However, at only $330 in monthly cash flow, I wouldn't be very interested in the deal. That's about $110 per door per month, which isn't acceptable in my opinion. The CoCROI is OK, but again, below what I'd pursue.

Robert Leonard

@Diana Villalon My pleasure! Best of luck.

Robert Leonard

@Adam Wallen I've found it useful to set daily goals for myself. I personally try to analyze AT LEAST 3 deals every single day. Best of luck on your search!

Robert Leonard 

@Diana Villalon On the surface, the numbers look awful. Your estimates and analysis looks good, but the results do not. I would not even consider a property with that low of monthly cash flow and CoCROI. I'd keep looking for better deals - they are out there.

Robert Leonard

@Jason Krawitz First off, it sounds like you have a very supporting family - that's great!

Now about the property - the monthly cash flow is okay, but the CoCROI is a bit low for me. Also, I think your vacancy, capex, repairs and property taxes are all too low. 

For the vacancy, I like to estimate closer to 8-10%, even on the higher side for SFRs. You know this market better than I do, however, so go with what you're most comfortable with. 

For capex and repairs, the percentages themselves are great, but the amounts themselves are not. The biggest thing to remember when using percentages to estimate costs for repairs/capex is that many costs are almost "fixed". They're not truly fixed, but they don't fluctuate much. @Brandon Turner talks about this on the BP podcast from time to time. The cost to fix a roof on a $100k property isn't significantly less than it is on a $300k property. However, on the $100k property, you'd need to allocate a SIGNIFICANTLY higher percentage towards repairs and capex than you would on the $300k property to be prepared for the same cost repair. So, on most properties 10/10 would be fine for capex and repairs, but on such a low-priced home, I'd personally go even higher.

For taxes, if you've confirmed this is accurate, then that's great. However, I find it hard to believe property taxes are only ~$240 annually... lowest I've seen was about $700 and that was for a very cheap home as well.

Robert Leonard 

@Michael Van I would highly recommend running the numbers and finding out what price works for YOU. Ultimately, that's all that matters. Once you have the number that you'd purchase at, you can offer that amount, or negotiate with the seller from there.

Robert Leonard

 Ah, that makes a big difference. It certainly seems interesting... my biggest concern is buying a property for $4,000. That seems almost too good to be true and that it could lead to major headaches down the road. However, if everything checked out, it seems like it could be an interesting opportunity.

Robert Leonard

 That's a great question, but unfortunately, the answer is that it depends. I have one mentor who won't touch a property unless the CoCROI is close to 30-33%, then I have another mentor who is happy to get close to 15-20% in today's market. I'd say it all depends on your risk tolerance, market, and goals. Obviously the higher the CoCROI the better, but at some point you have to determine what is "good enough" for you, and dive in.

Robert Leonard

@Adam Wallen Those numbers aren't awful - I personally don't like 13% CoCROI, I'd like to be closer to 20%. However, I recognize that is very difficult in today's market, especially on SFR's.

The biggest thing to remember when using percentages to estimate costs for repairs/capex is that many costs are almost "fixed". They're not truly fixed, but they don't fluctuate much. @Brandon Turner talks about this on the BP podcast from time to time. The cost to fix a roof on a $100k property isn't significantly less than it is on a $300k property. However, on the $100k property, you'd need to allocate a SIGNIFICANTLY higher percentage towards repairs and capex than you would on the $300k property to be prepared for the same cost repair. 

Robert Leonard