All Forum Posts by: Thomas Santella

Find out your (ARV) After repair value from recently renovated 6 bed 2 baths in your area, and then subtract that by the cost of repair and acquistion price. If this leaves you with a profit you are happy with over the x time it takes you to fix and flip the property, it is a good deal. In terms of receiving hard money, there are many lenders you can find with a quick google search that lend to first time flippers at much less than 20%, that is quite high.

I've never heard of a DSCR that lends on 1x, that is interesting.

A minimum 1.25 DSCR is what banks look for, so many people look at that as a guideline to their investment decisions. You are more than welcome to ask me questions anytime, and if you would like help looking for your first RE investment in NYC area just let me know!

Simply, if your cap rate is below your debt coverage, you will have negative leverage. a 5% cap rate at 7% IR environment will not be profitable if you are SOLEY relying on borrowing from the bank to fund your purchase. For the purpose of just understanding the napkin math I provided above it would be the following assuming an IR of 7% and the RF of 1.458%:

PP X (IR+RF)= Int and Principal PMT

1.69M x (8.458%)= $142,940

DSCR= 1.25 (To Ensure your Debt is Serviced by Your Income)

$142.940 x 1.25 = Min NOI of $175,675

Now I am not saying this is not a good deal, but if you were planning on ONLY borrowing at market rates from the bank, it would clearly not work so thats what the quick math would tell you. You would have to explore other purchasing options like putting down a sizable down payment to bring down PP, ask the seller if he/she would be open to seller financing at a lower borrowing rate on all or some of the PP, work with a partner who could put up some of the money, etc...

To provide a more simple resonse for this example, PP X CR = NOI. Figure out at what size down payment and/or borrowing rate you would need for your cost of debt to be below your monthly Income. If this doesn't seam feasible, neither does the deal.

When it comes to multifamily, the listing has a price and tells you info about the property such as how many units, location, what kind of condition it is in... Use that to estimate rent roll. Rent per Unit X Units X occupancy (.95%) = NOI. NOI/PP = Cap Rate. Compare your expected return with those of similar properties in the area to see if its a good fit. To ensure you are making $ each month, PP x (IR+RF)= Interest and Principal Payments. RF = rate factor (+1.458%), you add this to inclide principal payments. With I&P Payments x DSCR (1.25(what banks will loan at a minimum on usually)) and that will give you the minimum NOI the property will need to achieve for you to make a return based on basic lending rules. However, you can make certain properties work depending on your strategy, implementing creative financing strategies (seller financing if they have 100% equity usually), to keep your debt service lower. That is the most basic analysis of CRE MF, and if it passes those and seem like a go, I would then explore more information and do a deeper analysis. MF provides the amazing opportunity to have multiple exit strategies and ways to increase value during ownership, so beginning analysis can also vary depending on your goal with the purchase.

Hope this helps, and if you have any further questions, I am a real estate agent in Brooklyn and Long Island, and would be happy to connect

Welcome Jake! Buy and hold is the way to go! This community is a great way to meet like-minded people looking to invest with you, and other members of your core 4. I am a real estate agent in Brooklyn and Long Island that works mostly with investors and developers, connect anytime! 

there are tons of websites that sell leads or have market data including preforeclosure. I wouldn't recommend foreclosure.com, you are probably chasing leads that received 100+ calls already, same with many other lead gen sites. I've heard about people using propstream or batch leads that have live market data and filtering by low equity and high mortgage rate to find properties that fit the bill for preforeclosures before they happen- a way to be the first to the home- but I never did this myself. What I would recommend, is looking into TAX LIENS AND DEEDS. If you bid on and buy a tax deed, you pay for the unpaid taxes and penalty rollup costs on a property plus how much higher you bid, and receive the deed to the home for 25-50% of the property value if done right. Tax Deed laws are different for every state, but tend to be less competitive than preforeclosures. Buying a tax lein is paying the unpaid taxes in return for a guaranteed rate of return from the government until the owner pays the taxes. If they don't pay during the redemption period, your lien would get priced into a deed, and you would be paid when the deed is purchased or you can buy the deed yourself. A creative way to acquire property below its value that is similar to preforeclosures. I know its not what you were asking, but I thought it was something to consider!

Ask around to people you know who is in real estate, ask to meet with them. People are happy to share and talk about what they do for a living, and are excited when someone wants to learn about their profession. I got started by doing just the same, and it landed me my first job in real estate. If you talk to enough people or the right single person, maybe you want to do what it is they do and you just found yourself a mentor! Local RE Meetings are great to, as well as even reaching out to local agents to see if being a realtor is a path you would like to take.

I agree with @Dan M. Find out the cost of demolishing and construction, as well as timeline to completion to understand how long you will have expenses for. Include time to sell once completed as well. The way this would be worth it is if that spread is greater than the profit you would be making just selling as is (160k). Also consider that spread over the period of time it takes to build and sell if you develop a new home, and if that profit over time is worth it to you, then go forward. if not, sell as-is. 

The hardest part is having the deals. If you have those, buyers are easy to find. People are ALWAYS looking. I would connect with top realtors in your market who understand the value of working with a wholesaler and try to figure out their buyer network. What I do for my off-market deals is scrape the tax record for all LLC's that bought like-property purchases and then trace their name/number and establish relationships with them and bring them deals. People like to do business with people who do business, present a good deal, and you will have a long term buyer to work with!