Noob of the Night

[Robert Szalay]

Hello BP!

My Name is Robert, and I am a noob! I have been lurking around for a little while and love all the information available here on the BP community. I am in Colorado Springs, CO but am interested in starting my real estate investing ventures in the Wayne County Michigan area. I suppose you could say I started already?...

I found a 2 unit multi-family property and have been working through US Bank to mortgage it. I have been really excited and can't wait for closing on Tuesday... Until today happened.

My loan processor informed me today that they are not going to be able to continue with my loan, only a few days before the closing. This has been pretty hard to swallow and I don't really understand why still. The reason I was given was due to the operating expenses being too high. She said there were other flags as well but the only other one she provided was that I don't have experience managing property.

I don't understand how they came up with the excuse that the operating expenses are too high. I tried being conservative with my numbers and still show a nice cash flow. And the appraisal the bank ordered shows even better than my numbers.

Property: 37,000 (27,850 mortgaged at 4.85%)

I estimated renting each unit at $600/month. Expenses came out to $2,820 per year plus $3,400 for taxes and insurance. Ending with a cash flow of $433 per month with the mortgage factored in.

Well the appraisal came back and according the their report, estimated rent was $650 each and expenses came to $2995 and the cash flow being $1,050 per month. This number didn't account for the mortgage, taxes and insurance. So they came pretty close. They estimated $175 higher for expenses than I did but also $100 more for rent prices.

Is this really too high of operating expenses?

Thank you for any feedback and I look forward to enjoying more of the great resources available in the BP community!

-Robert