All Forum Posts by: Shawn Ackerman

Hello @Manny Guerrero congrats on getting started on your REI journey! You are in the right place!

In my experience hitting the 2% number has left a little money for me after all expenses are paid. Every situation may be different as you can have a lease option tenant who pays you $1500 per month and PITI are $1100 per month. Your cash flow in that case would be $400 because you do not have all of the other expenses a you would have with a "regular" tenant. In a lease option the tenant buyer is responsible for basically everything besides debt, tax & insurance.

but 2% Price to rent(reno) is a safe bet.

All the best!

@Jordan I hope you are ready because I get into the weeds on these type of deals.

ARV $200K

Reno $25K

$120K purchase

I would need to know the lenders seasoning requirements(This will tell me the holding costs until refi) and the lenders LTV. Let's use 75% LTV for this example.

Take 75% of $200K = $150K- 6%(Lender fees)$9000 = $141K note

Take repairs off that number off that number, so $141K-$25K=$116K

Next I have to know what the cash flow looks like.  So if I buy and renovate for $145K, I need the building to rent for $2900 per month or 2% Price to rent ratio.

Using the gross rents and 50% expense ratio(Vacancy, cap ex, maintenance landscape/snow, taxes, insurance utilities), we are looking at a cash flow number of around $1450 per month

From this number we need to take off the monthly debt service cost on $150K @6.5% with a 25Y Amortization.

so $1450 - $1012 = $438(cash flow after all expenses)

I would use this number to see how long it would take me to recoup the money that I left in the deal($120K purchase and $25K reno)

Take the actual loan amount $141K - Purchase and reno $145K, so there is $4K left in the deal.

It will take you around 9 months @ $438 per month or so to have $0 money into the deal as the $4K left int he deal will be recouped by then.

Here is where the compounding starts as you have no money into the deal and you repeat this process over and over while building equity year over year.

All the best!

@Adele Tegger I would take the funds and use it for investors as a HML. Obviously you would have to have the ability to underwrite deals and learn about the specific market but lending $60K for a $600-$700 per month interest only return, then compound it year over year will help you grow your capital.

Alternatively, you can use the capital to acquire, renovate and rent property in some of more affordable markets in the country.  However you will need to use the money as a down payment and partner with a lender to acquire and renovate.

Lastly, I would say using the capital to begin a marketing company where you target distressed sellers, get properties under contract and then sell the contract to investors would be a final way I would use the capital.

Hope this help you. All the best!

@Jinming He Congrats on taking the first steps to getting started on your REI journey! I've been where you are now and remember what I felt when deciding on a market. I was hyper focused on what actually constitutes a "Deal".

I am happy to see that you have narrowed your focus down to cash flow.  This will help with deciding a market because things like price to rent ratio, landlord tenant laws and other metrics can be used to measure markets evenly.

Keep in mind that when running your numbers on a deal, always run the numbers conservatively and include all of the expenses(Including reserves for cap ex, maintenance, vacancy).

All the best! 

@Kraig Hayes 0% interest deals are not uncommon.  There are typically 5 terms you should be aware of.  Purchase price, interest rate, amortization, loan term and down payment.  Usually you get some and seller gets some of the terms.

That aside, I commend your concern for the sellers tax liability however sellers who are willing to sell with a 0% interest usually have bigger problems they are dealing with.  Also I don't think it is a buyer's job to educate a seller. 

If your conscience will not allow you to execute a 0% interest deal then you can make the interest part of a "failure to perform" fee meaning, if you have a $200K purchase that you are supposed to refi or sell within 1yr let's say.  As a penalty you may want to add a nominal interest fee there.  But don't shoot yourself in the foot concerning yourself with the seller's tax liability.

All the best! 

@Dexter Florendo Kalai Aspacio "to close a deal" no but I have purchased subject too and sold to a lease option tenant after closing.  I've never got through the sale process with the end buyer but those are two strategies I've combined.  

It sounds like you may be referring to getting the seller to agree to sell on terms then finding the capital to repair or get the down payment?  Not really sure what other strategy you need to add to seller financing to acquire a property if a seller agrees to selling on terms.

All the best!

@Jeff Nichols There is no difference then buying or selling with an agent.  When you bought the property you signed a contract.  I would use the one you signed as a guide and in the space where you can add special conditions, put in the information related to the repairs, contingencies etc.....

I'm not sure if you are in a market like NY that requires an atty to buy and sell, but if not then I would use the state contract and modify as necessary.  DM me and I can send you the one that I use in WI.  Hopefully it helps.  

All the best!

Hello @Gopi Goswami Congrats with getting started on your REI journey! Remember, this is a marathon not a sprint. I would focus on analyzing real estate deals so that you will know what constitutes a "deal" to you.

Any deal should have at least cash flow or equity and sometimes you find a deal that is great with both. You make your money on the purchase!

Hello   @Carlos Poveda congrats on getting started on your RE journey! All the best.