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02-21-2011, 02:48 PM   #2501
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Join Date: Apr 2005
Posts: 1,815

Quote:
 Originally Posted by Fly Bear 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
Where are you getting the 15% COCR from?

COCR = (NOI - Mortgage payment)/Cash paid

NOI = gross rent x .55
NOI = (1400 x 12) x .55 = \$9,240

Mortgage payment on \$87,500 (125k - 37.5k) = 567.52/ mo x 12 = \$6810.24

\$9,240 - 6810.24 = \$2429.76

Cash paid = \$37,500

\$2429.76/\$37,500 = 6.5% COCR, it will take 15 years to make the down payment back.

EDIT: the .55 is the average income after expenses for a SFH. See post #101 in this thread for calculations.

Also I assumed 6.75% mortgage fixed at 30 years.

 02-21-2011, 03:59 PM #2502 Fly Bear journeyman     Join Date: Dec 2007 Posts: 325 Re: Ask me about real estate investing I assumed 4.75% mortgage over 30 years off of redfin - bad? Also, I used the 55% income as noted several times in this thread.
02-21-2011, 04:13 PM   #2503
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Join Date: Apr 2005
Posts: 1,815

Quote:
 Originally Posted by Fly Bear I assumed 4.75% mortgage over 30 years off of redfin - bad? Also, I used the 55% income as noted several times in this thread.
4.75% is for owner occupied, you'll most likely have to get a business loan at a higher rate.

Even then, either I've been doing this wrong, or you've got a number wrong somewhere.

125k purchase price
37.5 down payment
16800 rent (1400 x 12)
9240 NOI (16800 x .55)
using 4.75% yearly mortgage is \$5500

COCR = (NOI - debt services) / up front cash paid (down payment)

COCR = (9240 - 5500) / 37500

COCR = 9.9%

 02-21-2011, 04:35 PM #2504 Fly Bear journeyman     Join Date: Dec 2007 Posts: 325 Re: Ask me about real estate investing 15% COCR is on the 90k investment, you just did the math for the 125k one.
02-21-2011, 06:39 PM   #2506
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Join Date: Apr 2005
Posts: 1,815

Quote:
 Originally Posted by Fly Bear 15% COCR is on the 90k investment, you just did the math for the 125k one.
My bad, either way it will take a while to get your money back if you put that much down. The general rule of thumb is to get 2% of the purchase price in rent a month. So if your paying 125k you need 2.5k in rent a month to reach close to what spex's benchmarks are.

There is an argument for higher end homes having less of an expense ratio, but I'm not versed enough to say if this is true or not.

The main reason for the benchmarks (from what I've gathered) is that people say you should just put the money into a different, more passive investment rather than settling for less cap rate and COCR.

 02-21-2011, 06:42 PM #2507 BigBadJonV old hand     Join Date: Apr 2005 Posts: 1,815 Re: Ask me about real estate investing Also, Brandy, spex hasn't logged onto the site in over 2 months. If your waiting for an answer you may want to send bwana devil a message, as he seems to be the one who has gotten the most involved in lonnie deals after reading this thread. He may not be spex but he may have an idea.
 02-21-2011, 07:01 PM #2508 BrandysB veteran   Join Date: Apr 2006 Posts: 2,620 Re: Ask me about real estate investing Thanks BBJV, I figured it was a shot in the dark, i'm sure bwana will stumble upon this sooner or later =)
02-21-2011, 07:36 PM   #2509
Newt_Buggs
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Join Date: Feb 2005
Posts: 2,743

Quote:
 Originally Posted by BrandysB I know you don't recommend spending a lot of money on expensive seminars to educate yourself but I think MHP's is still quite a niche market and there are only a handful of people who can give you info on getting involved with them from first hand experience and even less than that willing to do it for free....with that being said I know you have respect for Frank Rolfes work, what do think of attending his weekend seminar that runs about \$2k and along with that you get all their material as well? Am I being naive in thinking it doesnt seem at all like all the other guru's out there in REI just by their tone and lack of desperation to sell you things?
I've read quite a bit of Frank Rolfe and Dave Reynolds work and have been extremely impressed. I also have a friend who has attended their seminar and highly recommended it. From start to finish you are learning practical material on how to better purchase, manage, evaluate and sell mhps.

Maybe order some of their reading material and then if you're still motivated attend the seminar.

Or, if you have some liquid cash you could invest with them. I have heard from other investors that they will sometimes send out invitations to their investors to fly out and join them on a deal evaluation. My plan has been to read as much as I can while investing with them, then fly out and join them on some deals.

 02-21-2011, 10:07 PM #2510 Fly Bear journeyman     Join Date: Dec 2007 Posts: 325 Re: Ask me about real estate investing BBJV - I'm aware of spex's 25% COCR minimum. However, I'm not using this as a primary vehicle of income, rather as diversification away from poker. I have no desire to move from my local area, and am willing to accept 10-15% COCR if this is the case.
 02-21-2011, 10:08 PM #2511 Fly Bear journeyman     Join Date: Dec 2007 Posts: 325 Re: Ask me about real estate investing Also, I believe that passive investments wouldn't get the freeroll on equity after 10 years, as well as the freeroll on appreciation. Seems like a no brainer to me.
 02-21-2011, 10:35 PM #2512 asaininvasion banned   Join Date: Jan 2011 Posts: 53 Re: Ask me about real estate investing i live in Mass..were can i find deals that meet the 2% rule near me.. thanks
 02-22-2011, 11:26 AM #2513 ogabay old hand   Join Date: Sep 2008 Location: 6g1p Posts: 1,368 Re: Ask me about real estate investing I live in Ft Lauderdale FL and most of the homes here have electric ranges. I live in one of the few areas that has natural gas piping for water heater and oven. I have the option of having an electric range or a gas one, my question is which one will bring the most value to my home?
 02-22-2011, 11:50 AM #2514 MSchu18 Carpal \'Tunnel     Join Date: Sep 2009 Location: Las Vegas, NV Posts: 13,749 Re: Ask me about real estate investing that's probably somewhat determined by the cost of the resources in your area... desirability is for gas, but in some states, that resource is much more expensive than electricity. eg: in california gas is king, cost is low and cooking is better with it... in Tennessee electricity rules, not because it's a better product but because natural gas is MUCH MORE expensive out there in comparison to NG
 02-22-2011, 12:25 PM #2515 ogabay old hand   Join Date: Sep 2008 Location: 6g1p Posts: 1,368 Re: Ask me about real estate investing That makes sense. It seems like in my area it is the former situation where gas is cheaper and cooks better than electricity.
 02-22-2011, 03:00 PM #2516 kaj_kyle grinder   Join Date: Sep 2006 Posts: 677 Re: Ask me about real estate investing Im looking at a commercial building with partial gross leases. I am trying to find a good estimate for "exterior repairs and maintenance" however i cant find a good number to use. is a 4500 sq ft building built in 1991. Theres also 8000 square feet of landscaping/parking lot. What would you guys use for this? My mortgage broker also recommended that i consider the possibility of tearing it down and rebuilding a 2-3 story retail/office plaze if the anchor tenant leaves. However my concern would be parking. Do you guys have a square feet to parking spaces ratio that you use?
 02-22-2011, 05:37 PM #2517 Tien Carpal \'Tunnel     Join Date: Oct 2005 Location: INFOWARS ALL DAY Posts: 6,355 Re: Ask me about real estate investing Kaj Budget 5%-10% for capital renovations. Depending on quality of building I would adjust my figure accordingly. Do you have pictures of said property? Much easier to give you guys an answer if you provide picture of property with it. That's a lot of land. Show us some pictures.
 02-22-2011, 05:48 PM #2518 Computer_Monitor enthusiast     Join Date: Oct 2006 Location: IN FRONT OF YOU Posts: 83 Re: Ask me about real estate investing Brandy referenced it earlier, but has anyone heard anything about the potential exemption from the SAFE act mobile home sellers were in court for? Are we still boned?
 02-23-2011, 05:25 AM #2520 BrandysB veteran   Join Date: Apr 2006 Posts: 2,620 Re: Ask me about real estate investing In your example I think what you worked out is your Cash on Cash Return. Your cap rate is NOI (not including debt service)/PP 577*12/45000= 15% cap rate I'm still fairly new like yourself so i could be wrong, i'll let the more experienced guys verify that. I'm still not sure where closing costs come in to play, and your example is also assuming you don't need to spend a dime on rehab when taking over which I imagine is rarely the case. I believe some people add in an opportunity cost for the 9k DP as well
 02-24-2011, 02:27 PM #2521 ItalianFX Carpal \'Tunnel   Join Date: Nov 2005 Location: 4/17/2012 Posts: 16,274 Re: Ask me about real estate investing Yes, sorry, COCR. I thought that is what it was, but I referenced back in the thread to make sure I was staying with a common format and I saw someone call that the Cap Rate. That's why I put the (?) next to it. 15% cap rate is still pretty good, yeah? The property looked in fairly good condition just from looking at pictures. My thoughts are that if if it's already being rented, then probably no reason to go in there and renovate. I'm going to let the deal pass because I'm still trying to learn a few things, but I'm getting interested more and more. Last night I pulled my Carleton Sheets set out and found out that I have a bunch of contracts, like rental leases, purchasing agreements, contracts, whatever else is in there, which is from the program and from getting some information from another landlord in the area. I also had an application for an REI club that I never mailed in. I forgot about all of that stuff. I'm going to go through the program again to relearn all of the creative financing techniques and just to learn as much as I can. Also, one more thing. I've been seeing it a few times. The common expenses that people are using is 45% (.45). I see people taking their yearly rental incomes and multiplying them by 45% and using that to figure out their NOI. Isn't that really taking expenses of 55%? In a simple example, if I have \$10,000 in rents and I estimate 45% expenses, that means I have \$4,500 in expenses, which means I am profiting \$5,500. Some people are just calculating 45% and then taking \$4,500 and subtracting the mortgage from that, which is coming out to a lesser number. Am I wrong and stupid? BTW, just read up to somewhere around 1500-1600 itt, still a long ways to go. And still hoping someone can answer some of my questions from a couple posts ago.
 02-24-2011, 04:51 PM #2523 4CardGrind old hand   Join Date: Sep 2007 Posts: 1,579 Re: Ask me about real estate investing I'm am bidding on a student rental house at University of Michigan and want to know how you would structure to protect your assets. Is their insurance that can defray some of your liability? Or would you set up an LLC to hold the title and of course use a business account?
 02-24-2011, 07:58 PM #2524 Wyman Carpal \'Tunnel     Join Date: Mar 2007 Location: Redoubling with gusto Posts: 12,324 Re: Ask me about real estate investing out of curiosity, where about?
02-24-2011, 08:04 PM   #2525
4CardGrind
old hand

Join Date: Sep 2007
Posts: 1,579

Quote:
 Originally Posted by Wyman out of curiosity, where about?
Woodlawn Ave (in Burns Park area), bit off a walk to campus, but pretty prime for the Big House/State & Packard area, lived out there one year when I was in school and didn't think it was too bad.

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