All Forum Posts by: Adam M.

Alright updated it to include some of the stuff you guys mentioned and kinda changed some assumptions.

1) That you buy at a discount

2) Lower interested rate on loan

Also added in DSCR calculation. I know some people try and "triangulate" their models based off different values. What ones do you usually use? I've seen DSCR, IRR, Cash on Cash

@Andrew Johnson For vacancy and a few other expenses I looked at some of the values used to market other properties in the area. I'll have to add in the leasing expense and up the replacement reserves budget. 

@Joel Owens I's 50% of gross a pretty standard rule on expenses?

Only put this model together in about an hour so I haven't contacted them about rent rolls and other things to get a more solid number. Kinda practicing right now. Thanks for the feedback.

Curious as to what IRR you look for in a value add MF. I spent an hour or so building a model with some guestimates. Kinda curious how far off I would be. With no rehab I estimated the IRR to be 12% and w/ rehab 22%.

Here is the model

https://www.dropbox.com/s/t3x56gkrs2glzgl/905-907-...

Property in question

http://www.loopnet.com/Listing/20414371/905-907-W-...

@Kim Tucker Yeah meant to go but it conflicted with an AI meetup downtown that I really wanted to go to.

@Bob Lachance I think you might of misunderstood what I was saying. I have been trying to find work for myself with a property manager. I am not the property manager. I'd be working to assist the property manager to better understand the business.

@Chad C. my issue wasn't that it the math was off. It was that with the current rates on mortgages you have a pretty low hurdle rate as far as seeking returns. So I gave a basic example that illustrated that. Plus Buffet's saying "pay yourself first" buying an asset that is going to get returns on your cash would fall into that concept. Also that 25% is not your ROI. It may cost significantly more than you paid for it over 30 years but on an annual basis it cost 4% and that is the hurdle rate for whether or not an alternative investment is better or not.

Having lived in a college town (Lawrence) for 8 years every PM asked if you were a student and mandated parent cosign on the lease if you were. Ask if the parents are paying and get whoever is paying on ACH. Don't want to have to wait on the student to ask the parent to write them a check. I've seen roommates do that circus. My current LL rents per bed and a lot of the fully furnished student apartments do the same but I've seen both. I'd market to grad students / alternative students (older, has kids, etc.). I know I got into shenanigans when I did my first undergrad but all the older people in my classes now it is night and day between actual undergrads and us.

A big bite to take for a new person. I haven't landed anything yet but for a first time deal I would want to be able to drive by it every once in a while and make sure everything is good. You are really going to have to put a lot of trust in someone to properly manage the thing. Have you vetted a PM yet? If you have I would for sure have them drop by and check it out for you before you buy. Make sure your numbers are accurate and that it would be a good rental. If anything needs work then you are also going to have to vet a GC remotely and that does not sound good.

Also ROI should be annualized in order make apples to apples comparison of investments.

@Nelson J Castillo What does the cancellation clause in your contract say? You may have to provide written notice of cancellation. Make you do all the steps properly and have an attorney help you. They might come back w/ a break of contract suit if done incorrectly.