All Forum Posts by: Crystal Smith

@Mark Lopezwhat's the average days on market (DOM) for your sold comparables

@Alex Hancock we've had properties in Chicago on large lots w/ 2 pins.  We've considered subdividing to build another home on the lot but we couldn't justify the building costs.  The area demographics would only support sale prices up to $250K max with the majority of sales between $150K & $200K.  So we've started investigating shipping container homes as an alternative option.  Bob Villa did one in Chicago a few years ago.

@J Campbell We like @Jerry W.strategy except w/ a few twists.  Jerry's strategy- purchase distressed/old properties, fix them up, rent them, take some cash out from a refinance to buy the next one.  Our twist to Jerry's strategy is to combine fix & flip w/ buy & hold.  Purchase distressed properties, fix them up, sell them, do it again & use the proceeds from fix and flips to support the buy and holds.  

If you're using a realtor they should be able to provide you with a sales & rental comparative Market Analysis (CMA). If you're not working w/ a realtor then check out sites like Redfin to run your own sales comps & Rentometer to run your own rental comparisons.   Never trust your feelings.  Always gather market data.

@Ken Morris for 2-4 family we use the sales comparable approach.

It will be interesting to see the responses to your questions.  Here's my response:

1. 1. Cap rate = Net operating income / Current market value (Sales price) of the asset- We may use Cap rate in our business for a quick comparison of investment opportunities but it doesn't drive our final decisions.  The most important factor for our investments is ROI or CoC return. 
2. 2.  W/ respect to applying it to SFRs versus commercial, if you're going to purchase or market SFRs in bulk then maybe it make sense to use Cap rate to compare investments.  If you're paying cash for a SFR or a 2-4 unit then again using cap rate to compare opportunities makes sense.  But if you plan on leveraging then throw Cap rate out & look @ the real return on your cash.    
3. 3. We believe the right GRM depends on strategy.  We like the strategy of finding/purchasing property in an areas that supports a higher GRM than the property we're evaluating.  (e.g. Area support GRM of 6 & we try to purchase @ 3) This usually means the property is distressed hence the rents are low, property needs to be updated....  The objective:  Improve the property & drive up the rents.  Not rocket science.

@Nick Deshotels For our own deals & those we work on w/ other investors, when we're evaluating SFRs ARV, we exclude properties that have >20% larger square footage from the calculation. We'll also exclude properties that are 20% smaller. We'll include 20% smaller if we can't find enough properties for a good analysis. Once we do that we don't make any adjustments to the ARV, we use the actual values to calculate the average. Some folks use +/- 10%. The premise for not making any additional adjustments is it gets us quickly in the ballpark.

@Alex Hamilton, Reading @J. Martin response to your post I'd start w/ understanding Financing first.  While we invest for ourselves we also own a brokerage firm & in Chicago there are some buildings that don't qualify for condo financing for various reasons.  With that in mind I'd try & find a Financing partner to refer all potential buyers for your future condo projects. 

@Erica Sherwood We've put mobile homes & mobile home parks on our goal list for this year so I anxious to see the answer to your post.  My guess is you would use a Land Contract that would also include a Bill of Sale for all of the person property attached to the land (i.e. the mobile homes).  There's are some mobile home forums on BP you should subscribe to.

@Adam Gratt   We had a situation with a business intent that was different than your's but it may be useful to what you're trying to accomplish.  

We had to fire a contractor, who then put a mechanics lien against the property.   A lien we intended to fight & eventually won.  But our investors were quite panicked because they believed we wouldn't be able to sell the property w/ this type of lien.  Our title company offered us a special policy (I can't recall the name used) that allowed us to escrow the funds if we lost the suit w/ the contractor.   Because of this policy we were able to  sell the property even w/ the mechanics lien showing up on title.  The eventual end buyer & their finance company were informed of the policy in place that allowed them to take ownership of the property without a cloud.  It was brilliant.

We weren't trying to wholesale the property as it appears you're trying to do so this strategy may not be applicable.