as opposed to whether a property is simply cash flow positive?

this is the formula I found:

The formula is: Annual Cash Flow x 100 = Cash On Cash Return (expressed as a percentage) where as annual expenses subtracted from annual income.

I saw this thread and wonder if any thoughts on building from scratch and selling. a Friend of mine are doing that and thought of doing a blog here or in OOt on my adventures as a new home builder.

I put together this spreadsheet to help analyze the CAP rate and CoC return on rental properties. Enter the inputs in the white cells in column C. The rest will auto-calc. It's basically the same calculator as here but in Excel format.

http://www.mediafire.com/file/ikme6a.../rent_calc.xls

Spex doesn't like the idea of building and renting stating that you can buy existing properties cheaper than you can build. Although while learning everything i can about REI I would like to explore building and renting triplex/quads. Seems like the numbers might work, although probably not as well as buying existing units.

I'd be interested in reading if you did start that thread. Seems like it would be hard to build then sell for profit in a down housing market.
Are you planning on doing the actual construction yourself, or having a builder build it for you? If there was profit in having builders build for you it seems that they would cut out the middle man (you) and build and sell themselves.

If you don't have experience in big renovation jobs, don't even consider construction.


You'll get raped.

I am already started. Myself and a partner are building new and selling as well as bought a bulldozer special and tearing down and building an executive duplex here in Canada. I am close to lock up on a 1470 sq ft bungalow. Also note Canada has not taken the big downswing the US market has. This may be to our strong banking system. Also my province is still going well with a resource based economy

As for getting raped not at all or not yet.

Note we are not renting but reselling. I have limited construction experience but do have some project mgmt experience

We are acting as the GC or project manager ourselves. Have a framing inspection Friday and will be to lock up.

One of the things I want to do for fun is buy some land and build a quad from start to finish.

In today's market you can buy WAY cheaper then you can build, but I suspect in the next 20 years there will be at least 1 year where it's "reasonable" to build instead of buy.

Plus I think it'd be fun I've already remodeled, added to, and finished places before, but taking a chunk of land and doing it all myself just sounds like fun

I agree, I think it would be fun. Not to mention you can build what you would really like to own/live in.
Probably wouldn't happen on my first place, but i'd like to look into the cost of solar cells to cut down on energy costs. It would be nice to build in a utilities included rental where I up the cost of rent without paying much for the electricity.

First off thanks everyone for helping out with this thread, I'd be no where near ready to make an offer if not for this thread.

Here's the skinny:

Duplex
List price: $45,000
Both sides currently rent for $305. They are each 1 bed/1 bath. I realize this doesn't = 2% rule. One side has been rented for 3 years other for 6 months.

Putting in an offer tomorrow, so wish me luck.

We are going to try and purchase it for around $35,000, spend $7-8,000 in getting it section 8 compliant, and rent each side for $406. We will not have to put anything down as we have means to borrow up to 50k at %6.26. (Can borrow over the purchase price if needed)

Jon, great to see you taking the first step in a purchase. I know you've spent a lot of time reading and researching to get to this point.

I'm curious what you have to spend $7-8k on to get it Section 8 compliant?

This is from memory cause I don't have the $'s in front of me at the moment.

Both hot water heaters are currently located in very small bathrooms and are not enclosed, next to impossible to enclose them and make bathrooms usable. ($500 for heaters $1700 labor and parts)

Unit Two's heat is a gas wall heater with an open flame, converting that to electric baseboard heaters. ($900 for baseboard heaters, $300 labor)

Unit Two's stove is a gas stove, so we are converting that to an electric stove. (The other side is all electric with ch/a except the hot water heater) ($250 labor $250 stove)

Will probably have to upgrade electric panel on unit two due to converting stove, hot water heater, and adding baseboard heaters. (~$500)

Unit One's bathroom has to be redone, floor, roof, shower. Small bathroom about 8 x 5 (and it has a hot water heater in it so super super cramp, should be a lot better w/o the hot water heater in there) ($1250 for bathroom, ~$600 for shower)

Attic access has to be redone (older house the current entry is barely enough to fit through as a slender person). Just going to trim out a hole basically. (~$100)

Replacing both front doors with steel doors. (~$600)

All old gas pieces will have to be capped off. (~$200)

Possibly putting insulation in attic. (If can get by without we probably won't do it) (~$800)

The house is structurally sound from what our contractor can tell, will have an inspection done so no surprises though.

The section 8 contact I have said that if we put it on the market, it will be filled by old ladies wanting to live near the hospital (2 short blocks away) and that she will have a waiting list for me.

I don't know if it makes a difference in your area, but here if you are all electric you get ~$45 more a month. So that is why we are trying to convert everything to electric.

I realize a few of these may be doable without, but we are trying to just get everything up to be as maintenance free as we can.

Also, we won't do anything until current tenants move out. But we will raise rents ~$25 a month if we find they are trouble clients. (Don't think we can raise it more than that)

Hi Spex, great thread.

The last 3 years would look like this; year 1: 40k, year 2, 150k, and year 3, 40k, gross income on my tax returns. I currently have about 80k liquid. I want to finance a 200kish property, but do you think I will have a problem getting a loan with 20% down because I am a poker player?

If yes, is it possible to buy 2 or even 3 properties without risking busto? A quick craigslist search of the rents in the area are 1800-2.2k. Thanks.

Bigbadjon, can you give a picture of this property?


I know the looks don't mean everything. But they do mean a lot.


I'd like people to show pictures of properties when they're talking about them.

Fly Bear


Do a search in archives for threads with mortgages for poker players.


There's been at least a dozen threads over the years about this.

Thanks Tien, I've searched it and looks like its pretty possible - I even PM'd someone and they gave me some good advice.

Do you think I can get loans on 2 or even 3 properties?

what do you think about silver?

Question about REI clubs.
I've searched online and found this website.. http://www.reiclub.com/
Is this a legit website to start looking for local clubs? Are there other websites people are aware of?
Also, if anyone knows of a club in Raleigh/Durham NC area, please let me know.

You're better off painting your rental property white rather than silver.

Talked to a couple mortgage banks today.

Looks like I'm gonna get Landlording and Property management for dummies.

Spex, Tien, et al.

There is a 125k property that seems to rent for 1400. CAP is 7%, COCR is 10%.

Also, I've found another property that is a 1BR that rents for ~1100, and is 90k. COCR is 15% on it, and 8% CAP. Condo fees are 215$/mo

IF my goal is to invest locally, and not abroad the US (due to convenience and I love the area) is this an okay deal for me? I want to diversify away from poker, and this seems like a good way to do it. I've checked out local REI clubs, and they've been largely a joke (make money fast omg!!!). Townhome fees are 290/mo.

I found this property through redfin.com, does that really matter?

Is jumping into buying both of these a bad decision? Should I just get my feet wet first with one?

I have about 80k liquid, and plan to put 30% down on both. I feel like we should be able to negotiate down the listing price as well, right?

What does the townhome/condo fees cover? This might make your expenses quite higher thus lowering your cap rate/COCR.

Also can you get away with putting down less cash (say 20%)? This will most likely increase your COCR (lowering your cap rate though).

When renting get references and check them. Getting rid of a deadbeat tenant is hard to do.

Looks like I would get a 15% COCR on the 90k investment. For that one, the fee covers these:
* Common Area Maintenance
* Exterior (Landscaping)
* Limited Insurance
* Trash Pickup
* Water

For the 115k one, the homeowner fees cover these:
* Common Area Maintenance
* Exterior (Landscaping)
* Exterior Building Maintenance
* Gated Community
* Hot Water
* Limited Insurance

Does the year matter too much on rental properties? I know spex says he likes to look at properties that have been listed longer b/c they're more likely to be desperate, so I'm looking for that aready.