Good, basic formulas for SFH investing

General Real Estate Investing
1

What are some good, basic formulas/strategies for SFH investing?

An example of what I mean…

The 10-10-10 rule [repeated by various real estate book authors] — which is making no more than a 10 percent down payment, paying no more than 10 percent interest (for an especially good deal), and buying at least 10 percent belong market value.

2

Can’t say I’ve heard of the 10-10-10 rule, but I would think it would be hard to do in every case. My strategy is to buy-n-sell 1-3 properties, use the profit from those to put 20%+ down on another property I found 20%+ below FMV, and cash flow. I’m in Texas and many times even if you put 10% down from a home that is 10% under FMV, you’ve boughten an alligator as the taxes and insurance will eat you alive.

3

My formula would be pretty simple.

Buy a home for 50 cents on the dollar or less. You should be able to make it work at that.

The key is knowing what that “dollar” is.

4

Here are the rules I use:

  1. I won’t buy at more than 70% of the market value
  2. I must get 2% of my cost (purchase price + rehab) each month in rent
  3. I must have a minimum of $100 per unit per month positive cash flow using real world
    expense numbers.

Mike

5

Mike, thanks for that good info! I have 2 questions for you…

  • How many rent houses do you have ?
  • Also, how do you estimate repair / maintenance costs?
  • And do you do any owner financed mortgages? Bank mortgages? Or both?

Thanks!
Steve

6

Steve,

I have several dozen rentals. They are divided between SFH’s and small apartment buildings. I have 1, 2, 3, 4, and 6 unit buildings.

I do not estimate repair costs or any other individual expenses. It is impossible to be accurate doing so, therefore I use 50% of the gross rents for operating expenses (including capital expenses). This is much more accurate than trying to guess which rental will have which expense in a given year.

I have purchased with bank mortgages, owner financing, and cash with a subsequent refi.

Mike

7

Thanks for the good tips/info, Mike