Posted by Del’Win on November 09, 2001 at 09:34:58:

Thanks for the answer. To answer some of your questions, I’m in Houston, I’m looking at SFH and the price range depends on the neighborhood of course. Some of the properties are off of the MLS. I feel like this might be a good strategy since in my market a lot of the homes are going for close to the list price which is fair market value. Should it be a certain range like under $90,000 cash? Let’s say a house has ARV of $80,000 and I get it under contract for $65,000, do you think this would be too much for a landlord to come up with? Should I assume that the investor can get an interest rate under 8% and then figure out the cashflow?

How much Cashflow for landlord? - Posted by Del’Win

Posted by Del’Win on November 08, 2001 at 10:13:50:

Let’s say I want to flip a house to a landlord, how much cashflow would they normally want to make the deal work? Can someone give me an example of this scenario with the numbers?

If you are flipping to me and the house is ready to rent, I’ll give 75% FMV as a landlord…at most. If I am rehabbing it, I want it for no more than 50% of finished FMV.

Re: Does my question not make sense??? - Posted by Ed Garcia

Posted by Ed Garcia on November 09, 2001 at 09:04:14:

Del,

It’s not a matter of your question making sense. You didn’t give us any parameters. You don’t tell us where you’re at, what price range you’re in, exactly what kind of property you’re looking at? Are you looking at a single-family dwelling or apartments? It’s the fact that each deal stands on its own accord, and each investor looks at a deal differently.

To give you a black and white answer. I recommend for you to structure your deal with a $200 a month positive cash flow on a small SFR. Take your gross rent. Subtract 25% for taxes, insurance, vacancy, and expenses. Then subtract your monthly payment. When you’re done you should have $200. You now have a $200 a month positive cash flow.

Del, the important part of my answer is, no matter what profit you decide to take. Make sure to subtract the 25% off of the top and then the debt/service of the mortgage in order to get it. So much of the time investors just subtract their taxes, insurance, and monthly payment on their mortgage and think what’s left over is their positive cash flow and that’s not true.