+1 (mirrion) to what Sifmole is saying.

While I think the investment is good, your assumptions about what financing you can get are miles off.

It's hard to find a non-owner occupied loan for less than 20% down and in some cases, 40%.

The simple numbers:

$800 * 55% = $440 to pay the mortgage and yourself.

I would assume 20% down and a ~5% rate for a 15-year fixed and do the calcs again.


It's really hard to find a very good property that cash flows well when you finance with a 15-year loan. Obviously if you can find that, it's amazing... maybe even dump all of your extra profit to pay down the principal and own it outright within a decade.


The super short hand rule is that your gross monthly rent is more than 2% of the purchase price, which is pretty amazing.

Thanks a ton for the advice guys. I really appreciate the help.

I've re-run the numbers with what MasterLJ suggested:

Financing Information
Purchase Price $34,900.00
Cash Invested $6,980.00
Loan #1 Amount $27,920.00
Interest Rate 5.00%
Monthly PI $220.79
Term in Months 180

Property & Depreciation Information
Land Value $18,000.00
Building Value $25,410.00
Building depreciation $924.92 at 3.64% depreciation
Total Depreciation $924.92

Gross Operating Income
Annual Rent $9,600.00
Less Vacancy $768.00
Gross Operating Income $8,832.00

Annual Expenses
Real Estate Taxes $797.00
Insurance $1,123.00
Maintenance/Repairs $960.00
Miscellaneous $768.00
Total operating expense $3,648.00
Operating expense ratio 41.30%

Cash Before Taxes
Gross Operating Income $8,832.00
Operating expense - $3,648.00
Net Operating Income = $5,184.00
Annual Debt Service - $2,649.48
Cash Flow Before Tax = $2,534.52

Rates of return
Total appreciation $1,745.00
Return on Investment with appreciation 85.90%
Return on Investment without appreciation 60.90%
Cap Rate 14.85%
Cash on Cash 36.31%

Still looks like pretty decent numbers. Tien suggested I purchase. Any other opinions?

Insurance is pretty dang high for a 800~ sq ft building.... Is it normally that high in Florida?


You're getting analysis paralysis.


It's not the greatest deal in the world, but you'll still make money with it.

10-15 years from now, you won't be able to buy property that cheap again.


I'd buy as many properties as I could if I lived in those areas where properties tanked.

No, insurance likely isn't that high. I know the tax records, so I just guestimated whatever tax + insurance = 20% of rent would be.

Thanks for the advice. I agree I am probably over analysing but I wanted to make sure I was calculating everything correctly so I wouldn't need to ask for subsequent prospective properties.

Found this tool when researching investment properties, thought it was worth posting

http://www.goodmortgage.com/Calculat..._Property.html

Sorry if this has been asked and answered before, but here goes.

What kind of tricks (dirty ones) do you have to buy a real estate at as low a price as possible?

Deal with the most desperate of homeowners.

Like taking candy from a baby.


But your negotiation skills have to be developed too. When I negotiate with a desperate seller, I kind of think of it like the butcher going in for the slaughter.

I don't use dirty tricks such as lying or deceiving in anyway. But I do use the power of negotiation and a little bit of emotional leverage.

A couple things I remind myself when dealing with a distressed seller. CASH is king! A bird in the hand is better then 2 in the bush to most of these people. Make them understand this concept! Paint a quick and easy transaction even though they never are.

If the deal is marginal then lock it up under contract. When the closing date gets near go back and renegotiate. This is by far and away the best tool I have in my arsenal. People see the pot of gold at the end of the rainbow. (AKA some cash from the closing) Trust me on this fact: They have already mentally spent the money!!

Now you go back and hit them cheaper. At this point the title work/lien search is done so you can say I need to buy it for XX amount and I can close in 3 days or whatever. The cash is so close!! They will take it 80% of the time!

Re: Forclosures
https://www.miamidade.realforeclose....2&bypasspage=1

Case Number: 08076194CA01


Seriously interested in this property here are some figures I gathered

Appraised for 162...
Rents out for $1900 a month( solid conservative estimation)
Property taxes are 335 monthly
Condo fees 665 monthly ( probably a little lower but close and makes round numbers)

Let's say I jus wanted this as an investment property what should I be willing to pay, then I'll adjust for me wanting to live in it / rent out spare Broom

Inexperienced tryin to buy codnonat auction
Should I hire a real estate lawyer to walk me through process
How much should this cost about ?

http://www.zillow.com/homedetails/12...79026210_zpid/

Is this interesting at all? I have DOW in the mail and was looking around on Zillow and saw this home. It's ~42k under tax appraised value and seems to be way under valued. What is the right play on a property like this? Buy and rent for a couple years and resell?

It should be easy to rent for $1k/month.

Homeowners fees of $115/month.

If I put 20% down @ 6% I come up with a payment of $527 + 115 homeowners is $642 expenses. Rental of $1K/month gives monthly NOI of $550. So it won't cash flow with these numbers. Is it a pass or is the discount to market enough to make this playable somehow? Thanks for the education Spex.

Krishan

With monthly rent equaling only 1% of the purchase price this would be a clear pass. It's definitely not undervalued when measured by the rental market.

What would make it interesting? If I could get it for 85k?

disclaimer: I'm a newbie at this stuff too
The return you need is very relative. Generally though in order to get a 10% cap rate using a 45% expense ratio (having HOA fees could throw this off) in your numbers you will have to secure a property where the rent is ~1.5% the purchase price. That would put you at a 67k purchase price for a 1k rent.

If you're happy with a lower cap rate things get easier. Also keep in mind that better cap rates tend to be in worse neighborhoods.

It isn't easy finding numbers that work well and I pretty quickly gave up in my local San Diego market and had to start looking nationwide.

Does it need repairs? Go take a look at the property from the inside.


You have to throw taxes + insurance into the monthly.

Plus 10% of rent, about 1000$ a year in maintenance.

Looks OKAY at best.

But you should be buying multi units for buy and hold rather than buying these little pimple houses.

That's just my preference though.

Look through this thread. Take gross rents, multiply by 45% to get expenses. What is left over is your profit + mortgage payment. The 45% includes: management, taxes, insurance, maintenance and reasonable vacancy.

So if your gross rents are $1k, you have $550 to pay your mortgage and yourself.

It's pretty clearly a pass.

coming from a place where half a percent in rent a month is reasonable id say go for it. you surely wont lose money.

if you a beginner just take it to get started then you can learn about deadbeats, toilets, rats,etc......

Hi!

im new here. i started to read this topic and i guess its fantastic.
could you tell me some general REI books to start with??
thanks a lot!

As has been stated several times in this thread - just read this thread before asking any questions. The answer to any question you may have is quite likely in it.

The answer to your specific question was posted by Tien at the top of this page (100 posts per page), and probably elsewhere itt as well.

Not sure who can answer this but Tien seems to have taken over the thread.

I currently own a boston style duplex (both sides are the same, separated basement) and have considered turning it into 2 condos and selling one side to generate more cash to try to invest in another deal. purchased the house for 205k and owe 196k on it (only owned for 1 year). there is a pretty nice condo complex down the street from me that has a 2br 2bath selling for around 165k. my condo would be 3br 2bath bonus third floor finished room. the house itself is beautiful outside, new roof, driveway in good condition, plumbing just fixed, water pressure issue fixed, so there is not much else that needs updating or fixing.

my question is do you think this is a good idea? pros/cons of it? i'm going to be contacting my real estate attorney tomorrow to find out the costs associated with this and if its even possible.

i know i would have to set up a HOA but fees wouldn't be too bad as there are no upcoming major repairs so it would just be plowing/lawnmowing and then a reserve fund for future major repairs.

my thought process is sell one condo... say for 150k to be conservative. pay down 90k of my condo while creating 50k worth of equity and having 60k left over for future investments.

am i missing something? the only thing i would be losing is the rent from the tenant in place who is problem free and very nice, but with 60k i could get another property with much more potential.

edit: this is not strictly an investment house. i bought it because it was a duplex so i would be making some rental income, but also because it was beautiful and i wanted to live here. now i want to start getting into serious re investing.

How much return are you generating on your property now?


If you're going to sell, might as well sell em both and put about 100K in your pocket.


Cons are:
lost of long term appreciation and capital paydown.
excess rental income
taxes

Pros is 100K.


It's a simple math problem.

Calculate how much you are earning in total (cash and equity) per year.

Calculate how much an extra 100K will earn you considering the deals you are looking at.


I'd also look into 1031 exchanges.

Well I really enjoy living in my side of the house. So i'm not sure that i would necessarily want to sell.

Also, I bought it using the 8k tax credit, so not sure how that would come in to play exactly.

I think realistically I bought this house at fair market value because I wanted to live here, so I don't think there is much upside for appreciation anytime soon.

I will update after I meet with lawyer.

Thanks

I would just try and subdivide the lot / building into 2 instead of condoize it.

Top, top thread spex, really appreciate your efforts and everyone else who has contributed. Read every post in here, gonna re-read it to cement everything I think. Really eager to get into property investing and have alot of ideas. Obviously sold the buy, fix, rent, refi model very well ITT.

I was wondering to anyone who can answer what is the eviction procdure like in the US?

Here in the UK if a tenant fails to pay rent you have to wait out 2 months of rent arrears £0 and then you take them to court to get them evicted. The government workers actually tell tenants that they are entitled to stay for 2 months and they 'probably wont get taken to court about it either' cos its not even worth the hassle.

Just puts greater emphasis on my screening process I guess. A bit of a bonus though is that we have something similar here to what you call Section 8 and its my moms job to find them housing. So hopefully get the pick of the bunch and get paid by the government at the same time.