All Forum Posts by: Steve Oswald

@Wade Reeves I would suggest gathering all expenses for the property before making that analysis.  Do you know about, water/sewage, trash?  What about landscaping, pest control, or other possible utilities.  Make sure you look at the leases to ensure you know what the rents actually are and what concessions are being made.  At first glance, if no recurring expenses you would be just about breaking even.  So it doesn't seem like a good deal unless you can get it for $160K or so (assuming no PM fees) if you are about cash flow.  

Any option to subdivide the lot or put something else on it that could produce additional income?

I would also address the month to month. Was your initial intent to keep this long term tenant in place? If so, then I would go through the process of getting market rate rent through your city hud office. If it is at market rate, and they pay after the 3 day pay or quit, I'd get a lease in place with the HUD office to guarantee you that income for the next year.

However, if your intent was to get out of HUD and get market rate renters in there, then I would non-renew. This may still result in an eviction or you can try the cash for keys to see if that entices the tenant to leave. I'd also make sure that you or your PM understand the local laws for HUD, to make sure you act within HUD guidelines.

@Jeff Mills Transition between owners, can sometime take a little while to get nailed down, tenants can be hesitant about paying to a different person, especially if they are not given a substantle lead time.  And yes tenants do tend to take advantage of the situation.  All it typically takes though is that 3 day pay or quit as @Allan Smith suggested to let the  tenants know that the new owner isn't a push over. 

Personnally, I allow that grace period in the first month of a new take over, and if my PM is dealing with those issues the second month, then we will issue the 3 day pay or quit. I also make sure my PM is in coordination with the HUD office to make sure we understand when we will get those rents paid. There may be a lag, but good PMs will have a good idea when rents will be paid by HUD.

@Stephanie Pieri Your welcome. One other item that you should also list if working with other investors (not sure how I missed this) is Net Operating Income. Investors use NOI to calculate cap rates and the potential for a property to increase in value. This is based on being able to increase your NOI buy increasing income or decreasing expenses. Again, less important if you are partnering on smaller deals, with individuals that are not RE savy. Let me know if you have any questions.

@Sam Craven It depends on the hard money lender, but what you can do is get the HML to fund the purchase up to a certain percentage of the ARV (after repair value). This is based on the anticipation that the property will warrant that higher value upon reappraisal/sale. You would want to do this, to save your money to complete the repairs, or if it only needs minor things and it is just that good of a deal, you can turn around and sell it for that ARV without having put much of your own money in.

I did this with my quad, where purchase price was $130K, ARV was 155K, and they funded $115K. Not 100%, but 89%. Better than putting 25-30% down.

@Raquel Sayago What type of investing are the two of you planning? I primarily invest in buy and hold, but I have used HML to buy multifamily, get repair costs and then refinance out. Good way to get some repair costs rolled in and refinance out your down payment if you had to put one down to begin.

@Robert Biggerstaff  That is a great question and definitely one up for debate.  Personally I would keep 3 - 6 months worth of expenses including debt for each property.  Also I would suggest taking the largest potential expense for each property based on age of cap x items, add them all together and keep anywhere between 30 and 50% of that number.  

To be honest, I end up using this pool to pull from when buying investments and then replenish as necesssary.

@Stephanie Pierie

You can use the BP calculators and they will produce a report that is usefull when proposing something to a potential partner.  I like to give a summary of the property, what kind of investment it would be, what the numbers look like when purchasing, and what you expect the numbers to be when you either flip, sell, or hold as a rental.  It's also good to have an exit strategy.

The numbers you provide shouldn't get into the weeds too much initially. If it is a buy and hold rental, then I'd include Gross rents, total expenses, debt (if you plan to have a mortgage), ROI, and Cash on Cash return as both $ and %. You can have details on a separate page if they want more information later on. Hope this helps.

@Stacey C. Awesome work!  Looking forward to seeing your progress.  Good luck and keep us updated.

@Jason Halpin Great chatting with you today.  We've got to get together again soon.

Thanks @BiggerPockets .com for creating a forum for RE investors to meet other investors in our areas.