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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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Hey all.
I'm looking at a property that's going to produce me positive cashflow on a monthly basis, but I'm not sure if after possible renovations and taxes every year I'm going to have anything left from it. The property might even become a liability, taking money OUT of my pocket when you look at the big picture: how much rent I collected annually and how much did I pay in taxes+ property management. But I'm not sure. I simply don't know.
Do you have any advice/ idea how do I find out?
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Rank: Rhodium
Joined: 8/31/2005
Posts: 1,155
Location: Toronto, Canada
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Shaq wrote:Do you have any advice/ idea how do I find out? If an individual buys a property a price at 5x gross annual rent then it is worth taking a closer look. Otherwise the individual should move on. An example is that a condo that produces $1000/mo in rent ($12,000 a year) needs to sell at 5 x $12,000 = $60,000 or less and it will cash flow well. That is a back-of-the-napkin screen that I use myself.
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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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Thanks for the reply man.
Whoa, do you actually find deals like that? Or should I ask, where? ;)
Cause for example, in Michigan now, you can buy a 2bdr, 2 br condo for 160,000 and get about $1300 rent.
So the rent is a little bit higher than the $1,000 in your example, but the price of the house is $100,000 more expensive...
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Rank: Rhodium
Joined: 8/31/2005
Posts: 1,155
Location: Toronto, Canada
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Shaq wrote:Thanks for the reply man.
Whoa, do you actually find deals like that? Or should I ask, where? ;)
Cause for example, in Michigan now, you can buy a 2bdr, 2 br condo for 160,000 and get about $1300 rent.
So the rent is a little bit higher than the $1,000 in your example, but the price of the house is $100,000 more expensive...
Here was one that I considered.  Disclaimer. I've bought a few Phoenix, AZ condos, but I just haven't bought the one I've linked above. There are thousands of these types of condos. You can buy them for $35K and rent them for $700/mo. $700/mo x 12 = $8400 per year $8400 x 5 = $42,000 max price. List price is $36K. Outcome: Take a closer look. That's basically how my brain is thinking about it. Here's how it looks inside: http://www.ticonline.com/images/glendale.kitchen.jpghttp://www.ticonline.com/images/glendale.bathroom.jpghttp://www.ticonline.com/images/glendale.livingroom.jpghttp://www.ticonline.com/images/glendale.laundry.jpgAnd yes, it's in a crime-free part of the city. I checked that too (I'm not THAT stupid).
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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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NICE!!
Just one question... What's a 'shortsale?' I know it has something to do with the lender, and that you have to qualify for it, but I'm not exactly sure what it is.
Dude, thank u thank u thank u.
That's one good rule.
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Rank: Rhodium
Joined: 8/31/2005
Posts: 1,155
Location: Toronto, Canada
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Shaq wrote:NICE!!
Just one question... What's a 'shortsale?' I know it has something to do with the lender, and that you have to qualify for it, but I'm not exactly sure what it is.
Dude, thank u thank u thank u.
That's one good rule.
On a practical level, when the owner puts their property up for short sale, the Buyer (you) needs to put an offer in for the owners approval. Once the owner approves (after potential negotiations) your offer then goes to the bank that holds a mortgage against the property for their approval. Basically for the Buyer it's a double approval process. In the real estate environment in Pheonix, AZ the approval by owner is fast, probably a few days. The lender on the other hand, could take months to get back to you. That's about it. In addition, if you're from Michigan you should watch Shea's videos. He's an investor in Detroit and he video documents all his evaluation, buy, repair/construction and rental of his investment properties. There's good stuff in there, but you need to dig for it. He has almost 1000 video posts. O.o
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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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Rickson9 wrote:
In addition, if you're from Michigan you should watch Shea's videos. He's an investor in Detroit and he video documents all his evaluation, buy, repair/construction and rental of his investment properties.
haha, right now I'm actually farther away... I've lived in Michigan for the past 3 years but now I'm back in Israel. OK so I think I may have found a great deal... In Phoenix, 3 units: 3BD/1BA, 2BD/BA, 1BD/BA, all together sell for $79,500. Gross annual rent is $19,140. X5 = $95,700. Which means the property (under your rule) could sell for at least $15,000 more easily. DP of 20% is %15,900 and estimated operating income is $16,000. Which means you cover your DP in a year. Now I think it's just too good to be true. What should I watch out for? (I've contacted the property's broker already, but he hasn't replied yet)
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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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And thanks for defining a real estate short sale for me. Alright so it's not something bad... Sweet.
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Rank: Rhodium
Joined: 8/31/2005
Posts: 1,155
Location: Toronto, Canada
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Shaq wrote:What should I watch out for?
(I've contacted the property's broker already, but he hasn't replied yet) City of Phoenix Crime InformationMake sure the property is not in a non-green color. ;)
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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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hahaha, its all good, thanks man!
So I see that you live in Canada...? So do you personally fly over to get a closer look at the properties you buy, or just get a management company inspect the properties and report back to you, or how do you do it?
'Cause I think investing from over seas is just a bit too complicated.. maybe it's not tho, you never know.
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Rank: Copper
Joined: 10/18/2009
Posts: 1
Location: Saudi Arabia - Riyadh
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Hi, Thanks for the topic post and your replies, especialy Rickson9.
My problem here in Saudi Arabia is that most 2bdr 2br condos sell for 72.000$ and rent for 488$ a month .. so its kinda impossible to find such good deals here .. any tips on how to find or whom to ask ?
The best feeling is pain when you know that success follows.
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Rank: Rhodium
Joined: 8/31/2005
Posts: 1,155
Location: Toronto, Canada
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Shaq wrote:hahaha, its all good, thanks man!
So I see that you live in Canada...? So do you personally fly over to get a closer look at the properties you buy, or just get a management company inspect the properties and report back to you, or how do you do it?
'Cause I think investing from over seas is just a bit too complicated.. maybe it's not tho, you never know.
I did fly the first time, but it wasn't necessary. I hire people to look it over (termites, structure, etc.). The property manager takes over once it closes. I have my RE agent send the property manager the keys (door, mail, pool).
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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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hahaha, life is good I see ;)
Have you been able to put financing on all of your investments?
It's weird, cause one of the brokers who emailed me said it's very hard to put financing on investment properties these days..
Thanks a bunch for all of your great tips man!
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Rank: Rhodium
Joined: 8/31/2005
Posts: 1,155
Location: Toronto, Canada
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Shaq wrote:Have you been able to put financing on all of your investments?
It's weird, cause one of the brokers who emailed me said it's very hard to put financing on investment properties these days..
Thanks a bunch for all of your great tips man! The broker is correct. Financing is difficult to find for investment property atm. I buy with cash.
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Rank: Copper
Joined: 3/8/2010
Posts: 16
Location: Michigan
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Rickson9 wrote:
I buy with cash.
You buy the whole property with your own money??
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Rank: Rhodium
Joined: 8/31/2005
Posts: 1,155
Location: Toronto, Canada
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Shaq wrote:Rickson9 wrote:
I buy with cash.
You buy the whole property with your own money?? Yes. Whenever credit loosens, I'll simply mortgage them to get my money out. In the meantime, I'll just cash flow.
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