All Forum Posts by: Sam W.

Michael Heisterkamp

Still tough to get a feel for cash-flow because you've not included all the numbers (rents, etc). You estimate $200/month in non-debt expenses.....and you have arrived at $300/month free cash flow for the 3 rented units. If you are comfortable with this method and bottom line then you really have answered your own question.

I personally don't agree with your strategy to live in the property for 3-4 months to "take advantage of the FHA down payment guidlines". Not sure this provides the "solid foundation" you are seeking.....but that's probably just me.

Michael Heisterkamp

If you plan to finance as an owner occupant you will have to live in them for more than 4-5 months. If you aren't going to purchase as owner occupant, why are you living there at all?

Also, you may run into financing challenges after you finance your 4th property...your options will be constrained.

In my experience, expenses (which should include vacancies) for a 4-unit will be more than the $200/month you are projecting. For instance, just taking into account a normal vacancy rate of 8% means that this 4-unit will experience 116 days of total vacancy a year.

If you are getting $700/month for each unit, this equates to $2725 in vacancy expenses/year (or $227/month just for vacancy).

If you add in other maintenance expenses I think you'll see you are well above $200/month in expenses.

Sam

Great point by Steve Babiak

As a RE investor, I keep the sites for all of the county Assessors, Treasurers and Records Clerks in my area of interest bookmarked. I'm always on those sites doing research.

Melissa Lapinski

Almost always available on the County Assessor's website (key word is ALMOST...some counties make it tough as Jon Holdman said).
Here is where you go in Lancaster County (I'm up the road in Cumberland County):

http://lcapp1.co.lancaster.pa.us/aoweb/

Michael Heisterkamp

Still hard to tell exactly what is included in the $1200-$1800 amount you reference (is this expenses + PITI; just PITI; just expenses?)

Regardless....since you are going to live in the 4-unit, I assume you will self-manage the property. Given no PM, a quick rule of thumb is:

(Gross rents X .4) - utilities - PI = Cashflow

Once you plug the numbers in, do you still get $1000/month? If so, is this acceptable to you? As Ned Carey, your monthly cashflow amount depends on how much skin you have in the game. I wouldn't pay $1M for $300/month in cashflow.

Of course, I've discounted any benefit from appreciation/taxes, etc and looked at it from a purely cashflow perspective.....you'll have to look at it through your own lens.

Brandon Eleazer

Hard to tell from your post, but is the furnance / water heater electric or is it gas?

If gas, since you didn't say, I assume the owner pays the gas bill? Would recommend you ask for copies of the gas bill for the a 6 month period in which both units were occupied (Oct - Mar if possible).

If electric, assume there a house meter that the furnace and water heater are on? Again, would get six months (Oct - Mar) worth of electric bills.

Figure out the average utility bill and subtract it from 50% of expected rental income [(Gross rents *.5) - utilities]. Is the result enough for you to service the debt payments and make a reasonable cash-flow (depending on your criteria)?

You also didn't mention water/sewer/trash. Does the owner pay this as well? Figure this in to your numbers.

Good luck

Congratulations Jamaal Hunt

Soon you'll be telling stories beginning with, "...back in '13 when I closed my first deal..."

I agree with Bill Gulley - cultivate potential buyers... "This property was snapped up as soon as I could offer it.... and I'm sure I can quickly find another for you".

Well done.

Sam

William Collins

How bad is New Britain? Better cash flow opportunities there I would think.

Slight increase in my area as well. Seeing the same as Chris Martin - 1 BR units have a slight decrease while 2 BR are about the same as last year. Biggest increase is for 3+ bedrooms where I am realizing about a 7-10% uptick in rent in the last 12-18 months. Also, my 3+ bedroom units rent to qualified tenants within days of being listed. Seems more families are looking for rentals....at least in my area.

Justin Ford

I'm jumping in late here (hope I don't incur a fee)....

I never have considered an on-time rent discount as part of the lease. Not saying it's good or bad, just hadn't considered it (though I am inclined to agree with Dawn A. regarding standard business practices - nobody offers you a discount for paying on-time).

That said, I do informally provide a 20% rent rebate every December to tenants who have paid on-time over the past 12 months (or 7+ months if they are new leasees). It is a nice bit of extra money that is appreciated during the Holidays.

Good Luck

Sam