All Forum Posts by: Todd Dexheimer

I would contribute to the match and then stop there. 

I don't get why you would buy it? Why not invest in the stock market for 20-30 years where you can get 5-8% after fees? For higher return use your money as a lender. Be a private equity investor in other syndications, businesses or crowdfunding. Your investment is $82,750, plus $6000/year until rent gets to the break even point, so likely over $100,000.  I don't get it, but I'm not from California. 

@John Woodrich I agree it's great to get those up front if they are willing to share, but a lot of sellers won't give that until you either send a financing letter or often after a PA is signed. If you can get that information before hand, that is always best. 

@John Woodrich couldn't agree more with the % rules. The rules should be used as a guide taken with a grain of salt, but too many people use it as truth. There are too many factors though. The 50% expense to income rule I tend to use the most, but I use it to quick gauge a deal with little information. 

@ryan phillips great job on achieving .9% vacancy rate. I am probably close to that right now as well over the last 2 years as Minneapolis has the lowest vacancy in the country right now. Every market is different and different underwriting applies, but I prefer to be conservative, so when over building does happen or rents do go down or when I need to evict a tenant I am prepared. Too often owners depend on everything working out great and then all of a sudden a tenant doesn't pay, a roof has a leak, the HVAC needs to be replaced, etc and they are stuck because they only cash flow $50/month in the perfect scenario. 

Come to some of the investor meetings. MNREIA is great for beginners, we also have an apartment investors group (meeting tomorrow at noon in Bloomington), MREE 1031exchangors group, MNREC and others as well. 

I would suggest visiting the market before you invest to be sure that it's a place you want to put your money. All of those markets have good cash flow potential, but all have been known to be traps for investors money. The key to those markets (and all markets) is to buy in the right area. Get in the wrong location and you will make no money and possibly loose

If you don't have a buyer, then wait. You can get recommendations for title companies, but you have nothing to send them until you have a signed contract. 

Ok, here's the bubble burst. Taxes will go up when you buy unless it's already assessed at $175k (check with your county on how they assess based on new purchase price). Lawn maintenance seems very low for South Carolina unless there is no yard and it's just landscaping. Also, there is no maintenance costs, which will run 10-15% of the gross rents. You don't have a replacement reserve (5%), Also, admin costs (bank fees, accountant fees, city license and inspection fees, etc). Last is that you will have vacancy, so you need to calculate that. On a 4 plex I always use 10% of the gross. 

Here are my numbers: 

Potential Income = $22000

vacancy = $2,200

Economic income= $19,800

Expenses:

Taxes = $1667 (likely to be closer to $2000)

Water/sewer= $1800

Garbage = $480

Lawn = $350 (likely higher - get a quote)

Insurance = $1137

Maintenance = $3000

Admin = $440

Replacement reserve = $1,100

Expenses: $9974

Income = $9,826

When I run my numbers I also use a management fee of 10% of the collected income. One added income thing you can do is add coin laundry. That likely will add $50/month of income. 

Also, buying a $500k house and only getting $2700/month doesn't work well with cash flow if you put a loan on it.