All Forum Posts by: Will Gates

@Ben Payano why can’t it rent for more to accommodate that $800 loss?

@Cassidy Farnsworth probably over analysis... I calculate things up and very few tend to hit the $100/door/month metric... maybe my parameters are too tight (10% vacancy, 10% cap ex, 8% repair, 8% prop manager, 8.5% leasing fee)

Wow, these numbers are impressive.... and you may be able to go a lot further (more properties) with more passivity by going long distance outside of CA after (if) you decide to cash out?

Thanks for sharing, @Rohit S Bora!

Is it common to increase monthly rent when going M2M? So if a tenant has a 1 year lease at $800/mo... then the 1 year runs out and they go M2M... could you then say that rent will change to $825/mo on the M2M for the next year?

Is that something that has to be outlined in initial leasing options when getting a new tenant in?

@Dennis M. very interesting approach

@Junior Picanco brilliant! Thanks for sharing!!!! Keep it up!

Very inspirational, @Anthony White!

Thank you to everyone for your replies. So an update regarding the two neighboring duplex properties in original post... they both went under contract before we could go see them due to work travel, etc., however, we're going to see a different potential duplex today (still about 30 minutes from us) and we've run the calculations under numerous best and worst case scenarios and we're thinking about trying to get an agreement of sale today, pending anything catastrophic during the showing. Probably needs about $15k-$20 of work, is currently vacant, but with some updates could rent for $750-$850/unit/mo.

There's also another duplex about 2 minutes from us that used to be on the market last year and is now off the market... however, the owner of the duplex has said that he's willing to sell at a bottom dollar of $110k, currently rents both units for total of $1,450/mo ($725/unit/mo) with utilities included in rent and tenants are willing to stay. So if we decide to go for this one, need to do some more analysis and see the property to estimate potential updates/renovations, we could potentially increase rent or at least reduce expenses by having tenants pay utilities.

Thanks for all your kindness and interest!

Thanks @Jay Hinrichs! This gives both of us a little more hope that we're on the right track.

@Milton Rivera, Thanks for your reply! Those are some great insights and things we've got to figure out, too. We definitely need to get a breakdown of rent, repairs, expenses and any other information from the owner we can get, as well as go the inspection route. Thanks for providing us with great tidbits to think about and research!

Good day, BP members!

My wife and I have started the process of reading everything in sight on BP, listening to forums, reading books, analyzing potential deals.. we're about 3-4 weeks into this process, so we're still newbies to this concept... and I think I've found something that's a good one based on various rules, etc..  She's hesitant because we're still learning the ropes regarding everything in the BP Beginners Guide.

I'm hoping that some of you would be kind enough to review this and let me know if you think I'm on the right track or if I'm way off and if... my wife is right and we should pump the brakes for a few more months until we're more familiar with everything.

Here we go...

Two duplexes asking price (AP) - $120,000 (so let's say for the remainder of this post we use the AP, but we'd probably make a lower offer, which would generally make the numbers better. The properties are about 30-45 minutes from us so we wouldn't be able to drive by them on a daily basis to check and keep an eye on them, but we could easily drive up and check on them once a week or twice a month or if an emergency happens. We would not be house hacking in one of them because they're currently all rented and we live for very cheap in our tiny house we built (rent is $245) so it's hard to beat that, plus we currently live close to my work.

• Units are currently all rented for a total of $3,000/month. ( $36,000/yr or $750/unit/month).

Units probably could use some fresh paint on the outside. Insides may need some work over time, but not right away. All TBD upon seeing them - no inside photos listed, so we'd have to go see them. Assuming they seemed in good shape and didn't need a complete renovation right away, let's go with the scenario that they're fine.  *This is why we set aside money from the 50% rule, right?)

Let's assume 10% vacancy/year - subtract $3,600/yr from $36,000/yr = $32,400/yr or $2,700/mo income. Using the **50% rule**, $1,350 a month would go towards CapEx/other Expenses. That leaves $1,350 to cover PITI and shoot for the goal -> cash flow.

We could put 20% down easy ($24,000), which creates a PITI of roughly $675, but let's be extra conservative and say that we got a crappy interest rate plus insurance was a little higher and PITI ends up being $850/mo.

$1,350 - $850 (conservative PITI) = $500/mo Cash Flow. That creates a 25% COCR  ($6000/yr CF / $24,000 20% down payment)

We could put more down payment, let's say 50%, $60,000. 
PITI becomes roughly $475. Again, we'll cushion that with extra interest/insurance costs and call is $625/mo PITI.
$1,350 - PITI of $625 = $675/mo cash flow. COCR of 13.5%  ($8,100/$60,000)

• Did I miss anything?
• Are my calculations and assumptions correct? (I know, assume makes an A** out of U and ME.) but humor me, please :)
• Is this worth pursuing as a first deal even if we're not able to get a lower price via an offer?
• Is this too much too soon?
• Is my wife correct in her fears of jumping in right away?
• Is it worth trying to partner with someone for a learning curve?
• Or...should we dive in and learn as we go?

I'd love your thoughts and I appreciate you taking the time to read this. Thank you for those that reply, too.