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All Forum Posts by: Abdul Azeez

Abdul Azeez has started 82 posts and replied 465 times.

Post: Unable to find returns in NJ

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

Folks - I am slowly losing hope. I have been through countless listings in the NJ Mercer county area where I have done extensive APOD analysis. I am unable to find cash on cash returns of 10% or so. Even if I can find something giving around $150 per month, obtaining a COC of 10% or more seems extremely difficult given prices, taxes and other considerations. Any recommendations for me?

Post: Buying online

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

Folks - Can anyone advise what I need to do if electricity is not on? Can I get it turned on temporarily? Also you said if the lender doesn't close in 35 days i need to find a new lender. How do I get a guarantee that they will close in 35 days?

Post: Buying online

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

I think the title search is under the water. I have already selected theirs. My realtor says the inspection only allows for an out for a major condition. I still need to see the contract for how its worded. They haven't sent the PSA yet. Financing is my major concern for now given the 35 day limit. I need to talk to my lender to understand the water dependency for appraisal and loan.

Post: Buying online

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

@ Wayne Brooks - Also to add, the contract does have inspection and financing contingency.

Post: Buying online

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

@Wayne Brooks - Why do you say that? Inspection contingency provides 7 days and financing contingency is 35 days. If lender says water needs to be there, that is not something you would know when you make an offer. 

Post: Buying online

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

Folks - I saw a property that I liked on-line at hubzu.com. Based on visiting the property I put an offer in and  won it. But, i have heard that I need to sign a PSA prepared by them which may only have a provision of 7 days for inspection and 35 days for closing and no attorney review contingency. This concerns me a bit. The lender supposedly also may have some objection to this because she cannot guarantee a 35 day closing for a property that does not have water especially if appraiser may require it as a condition for closing. They haven't sent me a PSA yet and I have not paid any deposit yet but when they do, is it safe to get into a deal like this given the concern around the timeframes? I believe they do have an inspection contingency for major structural things, not minor items. Kindly advise. 

Post: What am I doing wrong?

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

@ Dakoda Spencer You are welcome. Just remember everything that you need can be possibly found without having to spend thousands of dollars. Just ask.

Post: Help Analyzing this deal

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

@ Anthony Dooley I have shown all method above including ARV. Zillow was used not for the value but to see comparable sales. Even with ARV, the price I am willing to pay is much lesser than list price. Cap rate does not apply to non commercial properties. That is why you see such a huge difference above.

Post: Help me analyze this deal

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

@ Roy N assuming I spend $30 k in rehab cap costs should not be that much for the coming years. I have taken a safe estimate of 6 percent based on that for cap and maintenance each. Also I do understand the ceiling but want to be respectful in putting a low ball offer. How do I do that? $30 k is an estimate in the worst case. Does it make sense having a contractor look at it? I am not finding many who are comfortable traveling and providing free estimate if they are not guaranteed the job.

Post: Help Analyzing this deal

Abdul AzeezPosted
  • Real Estate Investor
  • Monroe Township, NJ
  • Posts 468
  • Votes 85

Folks - i need your help in analyzing this deal. The subject property is a homepath single family ranch style property with 3 bedrooms, 2 bathrooms and a basement with 1344 sq.ft listed at $195k. I have used three different analysis methodologies for determining the right price to pay for this property. My findings are below followed by a more detailed APOD analysis spreadsheet attached for those who need details. Kindly recommend what you think the right offer price should be for this property. Financing assumptions are a 30 year fixed rate mortgage with 4.25% APR and 20% down payment including rehab cost. The strategy is BRRRR and that's the reason the ARV analysis is used below as well. I am estimating about $40K in rehab costs including cost to fill in a pool in the backyard and convert to grass. This is just purely based on my walkthrough of the property and I have not had a contractor come through. .

My investment criteria is $150 per month per door. I had to extend the analysis over 10 years for Frank Gallinelli's methodology since first year has a higher cash flow as capital costs are zero (since rehab is factored into the loan) but is a 6% of annual rent year over year. So, I had to strike an offer price keeping in mind cash flow needs from second year to meet atleast $150 per door. This way the gains in year 1 are evened out starting year 2.

Analysis methodologies

1. Frank Gallinelli's APOD analysis

- Assuming, rehab costs of $40k, my offer price should be $139k

- Assuming rehab costs of $20k, my offer price should be $159k

2. ARV method

I ran a search on Zillow for properties in the same area of the same size sold in the last 6 months and couldn't find many.  I found one that sold for $255k in Jan 2016 with a fully finished basement. Removing a fully finished cost of $15k, I translated this to approx $195/sq. ft. I am not sure if this is the right number to use this because one of the major advantages in the subject property is it is 7 minutes from a major train station that takes people into New York or Philly and this is extremely valuable. I have used the $195 sq. ft above in my analysis. If I use this on the subject property, it comes to $262k as ARV. Using this, offer price = $146k (ARV * 0.7 - 20%)

4. Cap rate method

Assuming a median cap rate of 10% for the area, offer price = $98k (NOI of $9737 divided by 10%)

So, based on the above, I see a wide range between $98k to $159k none of which the lender may accept by the way. What would you pay?

I do know that the estimate from contractor for repair cost will have an important effect on this. That's the reason I used most pessimistic to most optimistic estimates in APOD analysis.

And I also want to know if it is insulting if I go with an offer based on my analysis if it is significantly lower than the list price or is it still worthwhile making an offer.