What are you finding for properties...........

[invst4profit]

Exactly.
50% rule is intended to be used the same way, preliminary evaluation.
It is a rough rule of thumb to be used for preliminary evaluation or well suited to virtual evaluation on a forum such as this where details on any given property are sketchy at best.

 

[housingrental]

Greg - Thanks - You negotiated for management against unions I assume ?

Evan Wright - Depending on cost of utilities deal, property condition, and stability of revenue source deal is adequate or not desirable... more info needed

 

[TodorYordanov]

QUOTE (invst4profit @ Nov 27 2009, 05:50 AM)
Since we seem to be discussing methods of financial analysis the REIN suggested system, correct me if I'm wrong, is to seek properties having rents 1% or greater of the purchase price. This number works out to a desired rent very similar to that which I seek by using the 50% rule.

In every situation where I get into this discussion with a REIN member the property rent in question has always fallen short of the 1% rule.

That I find interesting.






Here's a property in Hamilton that I've owned for 2 years:



Purchase price $141,000

10% down payment Financed on HELOC - $60 cost per month (total of 20,000 borrowed on Line of credit which includes, down payment, closing costs and small renovation)

130,000 mortgage - cost per month $390 (P&I 35 or 40 year amortization, variable 0.6 bellow prime - number in the bracket may not be 100% accurate, but are close enough)

Property tax - $148 per month

Condo Fees - $198 per month - covers all exterior work

Additional insurance $13 per month

Vacancy allowance 5%

Maintenance allowance 5%

Property management 10%



Monthly rent $1250

Tenant pays all utilities.



Unit is in a good shape with newer furnace, electrical, kitchen, bathrooms, flooring



Exit strategy - hold for 5 years, then hold for more or sell at market price or sell as "Lease to own".









What is my cash flow?



Disclaimer!



I understand that when posting to the "open" forum I may get responses that are "different" that the REIN system and that's OK.

 

[evanwright]

QUOTE (invst4profit @ Nov 27 2009, 10:35 AM) Exactly.
50% rule is intended to be used the same way, preliminary evaluation.
It is a rough rule of thumb to be used for preliminary evaluation or well suited to virtual evaluation on a forum such as this where details on any given property are sketchy at best.

I know this has probably been covered, but what exactly constitutes operating expenses? Is your full mortgage or LOC interest plus some principal included? If so i don`t believe any of my current holdings or any I`ve investigated pass the 50% test.

 

[housedoc]

QUOTE (TodorYordanov @ Nov 27 2009, 11:00 AM) 130,000 mortgage - cost per month $390

Really?
Is that interest only?

 

[TodorYordanov]

QUOTE (housedoc @ Nov 27 2009, 11:21 AM) Really?
Is that interest only?


No, its` P&I for 35 or 40 year amortization.

 

[housedoc]

QUOTE (TodorYordanov @ Nov 27 2009, 11:39 AM) No, its` P&I for 35 or 40 year amortization.

35 or 40???? You`re not sure which?

Am I on drugs?

 

[TodorYordanov]

QUOTE (housedoc @ Nov 27 2009, 11:56 AM) 35 or 40???? You`re not sure which?

Am I on drugs?


Yes, I am not sure! Let`s say 40 years.
I have more than one property and can`t remember all of the fine details down to the last cent. The figures I provided are "close and accurate enough" to do a reasonable analysis on this property.

What exactly is your point?
Do you have one?
How much would be the difference in 130,000 mortgage with 35 or 40 year amortization? $20, $30, max $50?

I don`t know if you are on drugs.

 

[tbarcier]

I have the same rate (minus .6) on the same amount (130,000) on a 35 year amo. and my payments are 406. So I don`t get what you are saying. Are you really on drugs? If you are a Doc I guess you could prescribe some good stuff eh?

 

[TodorYordanov]

I posted some real numbers to stimulate the cash-flow discussion and base it on some factual data, instead on arguments and general assumtions.

I see no real interest / takers to tell me how much cash flow this property makes.

I wonder...

 

[CamMcCarroll]

To answer the question posed by Todor, property cashflows:

$219 per month
$469 per month when reserve met.

I have a couple townhouses just like these.

I`m having no problem finding good cashflow in Hamilton. Multi`s cashflow even better.

 

[TodorYordanov]

QUOTE (Cam @ Nov 28 2009, 06:56 PM) To answer the question posed by Todor, property cashflows:

$219 per month
$469 per month when reserve met.

I have a couple townhouses just like these.

I`m having no problem finding good cashflow in Hamilton. Multi`s cashflow even better.


Thanks Cam. But you are a REIN member, there must be something "funny" going on...

Are you sure I am not $700 in the negative on this deal?

 

[invst4profit]

Todor

The numbers you have posted show a positive cash flow. That is based only on actual numbers you have posted.


Obviously two possible answers can be presented. From the perspective of an accountant cash flow would be based only on actual numbers over the period of 12 months of operation.
Since you have included percentages as estimates for some figures you are not seeking an accounts answer.
A rough estimate could be given based on a estimate of the expenses you have excluded or one could add up the numbers you have posted and state your cash flow is XXX.
Which answer do you seek.

In addition to a budget for increased condo fees have you given any thought to how a special assessment from your condo board is to be factored into your cash flow estimates.
Also where are your numbers or estimates for such expenses as legal, accounting, evictions, office expenses, advertising etc. These are all of the expenses small operators tend to exclude because they feel they are too small to consider or will never happen.

Based on actual numbers posted you are positive but I predict you will have negative cash flow based on a long term hold plan do to a oversight on your part to include all expenses and ignore the possibility of such things as special assessments and evictions etc.

At this moment in time however it makes very little difference which of us is right.

 

[housedoc]

QUOTE (TodorYordanov @ Nov 29 2009, 12:28 AM) Thanks Cam. But you are a REIN member, there must be something "funny" going on...

Are you sure I am not $700 in the negative on this deal?

You are squeezing a coupla hundred per month with a long amortization, a very low interest rate, high LTV mortgage (92%?).

I hope you`re not spending it all on your car.

 

[housingrental]

housedoc:

Why all the hate?
Instead of attacking people why not present a better alternative course of action?
What is the point of your posts if there (you have) no better way of doing something?

And to comment specifically on your last post - A few hundred per month cash flow on a 140K place seems pretty desirable to most people... and on ~20K cash in would have the vast majority of investors excited... then factor in mortgage pay down and appreciation over time, and the possibility of rent increases exceeding expense increases in the future and it looks even better....

Perhaps you should post what you`ve purchased around the same time frame, around the same area, around the same price point that was a much better deal that an investor should have done instead?

 

[TodorYordanov]

QUOTE (invst4profit @ Nov 29 2009, 09:04 AM) Todor

The numbers you have posted show a positive cash flow. That is based only on actual numbers you have posted.


Obviously two possible answers can be presented. From the perspective of an accountant cash flow would be based only on actual numbers over the period of 12 months of operation.
Since you have included percentages as estimates for some figures you are not seeking an accounts answer.
A rough estimate could be given based on a estimate of the expenses you have excluded or one could add up the numbers you have posted and state your cash flow is XXX.
Which answer do you seek.

In addition to a budget for increased condo fees have you given any thought to how a special assessment from your condo board is to be factored into your cash flow estimates.
Also where are your numbers or estimates for such expenses as legal, accounting, evictions, office expenses, advertising etc. These are all of the expenses small operators tend to exclude because they feel they are too small to consider or will never happen.

Based on actual numbers posted you are positive but I predict you will have negative cash flow based on a long term hold plan do to a oversight on your part to include all expenses and ignore the possibility of such things as special assessments and evictions etc.

At this moment in time however it makes very little difference which of us is right.


Thanks for your answer.

I did not estimate legal since it will only be an estimate. I was trying to work with hard, known numbers.
As we both know there is more than one way of calculating cash flow, each one is right for a particular situation.
If I go down the road of "estimating" I may be tempted to estimate, appreciation, mortgage paydown, rent increase, realtor fee reduction, tenant and profile, property managements challenges, etc.etc. All valid points.
The point is that ANY positive cash flow situation, no matter how good it is can turn into a negative cash flow because of certain "chain of events". Our job as GOOD investors is to look at all the angles, and make decissions that make sense today and down the road by staying in control and knowing how to properly respond to challenges.
This conversation about cash flow can go on forever. There is so much more than cash flow that makes a particular property good investment or not.

 

[invst4profit]

Cash flow, at best, is no more than a rough estimate and unless two investors discussing the subject have the same perspective on the subject they might as well be discussing the length of a string they have never seen.
Cash flow can only truly be known when you sell a property assuming one keeps very accurate records and bothers to figure it out. This is the reason we use estimates, averages and formulas.

On any given property it might as well be agreed that cash flow is what the owner of the property says it is and all others keep there opinions to themselves.
What do we care if that investor even understands what cash flow is. It`s there business.

However in the case of a investor asking what to expect the cash flow on a prospective property purchase might be --- let the flood gates open.
Estimates are based on the individuals perspective and there perspective is shaped by there financial personality.

Numbers may be twisted, turned and manipulated to look any way one chooses. Creative accounting.
One and One may not add up to three but if it looks like a three and someone believes it is a three then three it is.

It`s too bad people take the subject of money personally. Money and income are only a form of measurement and not a very accurate one at that.

 

[TodorYordanov]

QUOTE (invst4profit @ Nov 29 2009, 07:00 PM) Cash flow, at best, is no more than a rough estimate and unless two investors discussing the subject have the same perspective on the subject they might as well be discussing the length of a string they have never seen.
Cash flow can only truly be known when you sell a property assuming one keeps very accurate records and bothers to figure it out. This is the reason we use estimates, averages and formulas.

On any given property it might as well be agreed that cash flow is what the owner of the property says it is and all others keep there opinions to themselves.
What do we care if that investor even understands what cash flow is. It`s there business.

However in the case of a investor asking what to expect the cash flow on a prospective property purchase might be --- let the flood gates open.
Estimates are based on the individuals perspective and there perspective is shaped by there financial personality.

Numbers may be twisted, turned and manipulated to look any way one chooses. Creative accounting.
One and One may not add up to three but if it looks like a three and someone believes it is a three then three it is.

It`s too bad people take the subject of money personally. Money and income are only a form of measurement and not a very accurate one at that.

All in all, investing is just like life. And how you do anything is how you do everything. It`s complicated.

However, what`s important is to learn and do.

All the best to all who are trying to win and also help in the process.

 

[EdRenkema]

QUOTE (invst4profit @ Nov 29 2009, 05:00 PM) It`s too bad people take the subject of money personally. Money and income are only a form of measurement and not a very accurate one at that.
I guess that depends on who is measuring and what their value system is.
Its not so much what you have in life, its more what you do with what you have.