What would you do with this information?

Question

I was doing my daily cruise through Craigslist when I ran across someone selling a duplex.  It turns out that he's got 6 duplex and 1 house for sale upon further communication.  The properties are what I would classify as B properties for the area.  He let me know the current rents on all the properties and informed me that they were all currently rented, and gave me the insurance and taxes on one of the properties, assuring me most were pretty close.  Of course, if and when I proceed due diligence will verify all information.

He'd like to sell them all, but he's willing to sell as many as I could take on.  I know I don't have the capital for more than one, maybe two currently, but I'm not sure if they're worth delving into.

This falls under the single or home run argument in my head.  I think at least a few of these properties, maybe more depending on the price could be good positive cash flows.  He seems motivated to get them sold.

I got my nerd on and I built a quick comparison tool in excel to analyze any potential deals.  Of course, the picture is static, so it captured the values I had input when I took the screen shot.  The estimated monthly rent being the actual monthly rent in this case.

Is this the type of deal that would be better suited for wholesale?

Tom Mole · Answer

@Samuel DeMass with all due respect, your spreadsheet doesn't help much. Its an unfortunate mix of apples and oranges (with a couple of grapes thrown in). Please annualize everything. A monthly cashflow next to an annual NOI means I've got get a calcator and sheet of paper. (Not gonna do it)

Next, what are your investment goals? When Kiyosaki asked his rich dad "is this a good investment?" he got the reply "I don't know. Are you a good investor?" Are you looking for duplexes? Are you after cashflow or capital gains? If the numbers (after being annualized) what you're looking for in a long term investment? Do you have a buyer looking for those numbers? What sort of financing can you arrange? Would the seller help with financing?...and so on and so on.....

I hope this helps. Don't be discouraged. Just sharpen your pencil (or spreadseet) and vet the deal again. We all do it. I love to see an update, if you get a chance. Pop mail an email if you'd like.

All the best.

Samuel DeMass · Answer

@Tom Mole  , I thrive in a thick skinned community and I appreciate your feedback.  I have annualized the

I am looking for multiplex properties, which is why these properties caught my attention.

Since my last post I was in contact with the seller again.  He's made the unfortunate move to list them on the MLS.  Is there an honorable way around this issue?  I don't mind working with an agent, but I've done the leg work to find these deals off the MLS.

I don't really know any buyers at the moment that are looking for this property.

@Jordan Redar , I appreciate your thoughts!  I think I'm looking for a base hit here.  Unfortunately, my time is well consumed by work 6 days a week on the regular.  I'm not sure that I have the time to manage a rehab to nurse a property back, so I think I'm looking for a turnkey type property.

@Bill Jacobsen , What do you normally use for your vacancy/mngmt/repair costs?  I've been going with a nominal 10% based on the performance from some of my other properties, which admittedly could have been pure luck.  Since I was able to get an asking price from the seller and what he allegedly owes the banks to get out of the properties I was able to calculate a 10.117% CAP rate and know where his bottom line should be, depicted below.  With this information what do you think?

Bill Jacobsen · Answer

I usually budget my maintenance and capital expenses higher and would probably estimate about an 8% cap on the property.  If your cost of money is 5.5% you have a spread of 2.5 percentage points.  I would prefer 3.

The important thing is to determine whether this ties in with your goals in real estate.  The numbers are second.

Good Luck.

Bill

Jordan Archer · Answer

As long as it's positive cash flow, you need to determine if it's right for you based on your desired criteria (ie. $/door)

If $100/door is your goal, then you are great! If $400/door is your goal, then move on.

Just make sure those numbers you were given for rent are accurate!

What would you do with this information?

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