All Forum Posts by: Aaron Hurst

I'm getting closer to making an offer on an out-of-state class C buy-and-hold multifamily property.    I'm looking for a >10% cash-on-cash return.  However, I've seen the full income statement from the last 2 years, and the previous owner hasn't been making nearly as much as I would expect, mainly due to high costs.

First question: should I be worried that this is a lemon... or is it an opportunity?

Income and Costs (all numbers are annual)

Nominal rent - 43.6k

Actual rent - 37.3k (14.5% vacancy.  33% turnover rate)

Management - 4.5k (10.6% - could bring down with a PM switch)

Maintenance - 5.0k (11.6% - ok, older building and a fair amount of tenant turnover)

CapEx - 2.4k (5.4% - mostly plumbing costs: is that a worry?)

Tax - 2.6k (6%)

Landlord Gas Water Heating - 1.3k (2.9%)

Landlord Gas+Oil Heating - 2.8k (6.5%)

Landlord Other Utilities - 5.5k (12.6%)

Insurance - 1.1k (2.6%)

NOI - 11.8k

Lending costs - 8.6k

As is, cash on cash would be 5.5%

Is (eventually) getting 10% cash-on-cash realistic here?  Where is this going wrong, and how would you bring up the income?  Or should I be bringing down my offer a lot?

Agent and I agree that a oil-to-gas conversion would pay off very quickly.  Split metering for gas heating and hot-water might be a pricier but good longer-term investment.

Thoughts?

Thanks!

--Aaron

Does anyone have a referral for an investor-friendly buyers agent in the Lebanon or Lancaster Pa markets?  I'm looking to invest from out-of-state and would appreciate any recommendations.  (Agents please feel free to promote your qualifications.)

Thanks for the introduction, @Jonna Weber.  I haven't been to the local Bay Area meetings, but I will look into them.  Some off-line learning would be useful.

Hello BiggerPockets!  I'm completely new to real estate ownership and investing but am looking to gather some information to jump into some out-of-state buy-and-hold multifamily properties.  

I'm based in San Francisco, where the barrier to entry is a bit high (... to owning a home, let alone an income property).  My primary goal is to diversify my investment portfolio, while continuing to work my day job as a software engineer.

I'm currently focused on a few PA markets such as Lebanon, Lancaster, and Pittsburgh, where the numbers look more favorable and where I grew up and went to school.  

I hope to clarify some aspects to the investing and transaction processes that are still unclear to me.  This forum has been a great help already.  Thanks!