All Forum Posts by: Adrian Stamer

Thanks for the responses. For me this is a larger deal, especially with the unit count. One thing I forgot to mention is the laundry on site does between $1500-2000 extra a year.

While I agree the utilities is less then ideal, at least the electricity is separate so certainly better then nothing.

I am still curious to see what is thought about the management and maintenance situation. Is this reasonable/normal for something of this size?

Hi

so I am looking at a 14 unit apartment building. It is in a cheaper more rural area, but has excellent rental history. I am mostly curious what you think about the management and maintenance setup, but to get us on similar pages I need to share the numbers first.

I'm working off a $415k purchase price, with an extra $15k held for initial improvements.

Gross rents are $6100 a month, ($73,200 - 10% vacancy = $65,880 a year)

They currently have expenses for 2012 (and half of 2013, so they estimated for the remaining part of the year) which comes out to $29,074, for a NOI of $36,806.

But, with these numbers they have only $1k set aside for major repairs, so with a 4.5% 20 year loan, this current does not work. This would provide 9.77% cash roi, but raising the repairs budget to $3k a year drops the cash roi to 8%. Though I believe this is still above 8% cap rate (34,806/415,000)

but before you say $3k a yr is too low, let me ramble on some more below...

now a bit of a break down on the expenses

Landlord pays electricity for common areas, water, sewer, trash which runs $790 a month, with water taking up the majority of that. Tenants just pay electricity. Does this seem normal for a 14 unit? Obviously it varies depending on localities, but ~$475 a month for water strikes me as high.

Also, I am curious what you think about the full management and maintenance setup. Right now they have management in place which is 10% with no fixed fees, just based on gross rents. Also, they have a maintenance guy on site who in exchange for his services gets a free 2bd apt (which would rent $450 a month in rent). So PM is ~$6588 a year and maintenance guy gets another $5400. The current owners say supplies for this maintenance also cost another $4k.

Going off the usual 10% rule of thumb for maintenance and repairs, $5400 for the guy + $4k in supplies + another $1k (according to them) seems rather high for this building. Especially since $1k a year reserved isn't nearly enough for significant repairs. Also there seems a little bit of redundancy between the property management and having a maintenance guy on location at all times.

Maybe due to the more rural location and cheaper rents is the reason for these above average costs? I'm just trying to figure a way to streamline expenses some.

Thoughts?

Anyone care to share their preferred credit checking providers for tenant rental applications?

Thanks

Hey

As title states, looking for some resources for some standardized virginia rental contracts. I've done some googling but looking for some additional input

thanks in advance

Hello, my partner has around 8 mortgages out so it'd have to work for both of us.

Hello

currently I am using a local portfolio lender, but they only offer 3 & 5 year balloon mortgages. I personally only have 2 mortgages, but my partner has about 8. I am looking to get a couple safer fixed rate (ideally 25-30 yr) mortgages for multi family units.

Any suggestions? 25% down is fine. Our credit is around 750 each.

it's just a commercial loan, hence the 5yr balloon. I just used one to buy a 3 unit. But I agree for your standard conventional loan it's 25% down. Which is what I started to get into w/ my second post. Ditching my partner for this specific property and doing an easy conventional while I still have under 4 mortgages out.

ah my mistake, the parking lot next door goes to a real estate office but it is unused. I was told spots COULD be rented and have been in the past though none of the current tenants have cars. It's a small town, ~25k people and the college is only about 1k people. So I mention college because there is a college nearby but the area isn't overwhelmingly collegey.

I live in a city so I understand how much of a headache parking can be. This just doesn't strike me as one of those areas

thanks for the replies

I have a few options on multi units in this range so I think I will plan on being more aggressive with trying to get prices down. My goal with these properties is to diversify from just reinvesting into my current biz. So these would definitely be buy and hold for a while. I've looked over a decent amount of properties is in area and $490 or so for a 2bd is lower.

It's interesting that you bring up no off street parking to be such a sticking point. Personally I don't see it as much of a problem. This is a smaller town so it's not a big city but a tenant on the street would still have to park around the corner. Though again the option of having rental able spots next to the propety is an option

I don't like the 5 year balloon either. Currently my situation is I am looking to invest with a partner who has something like 8 mortgages so getting some sort of conventional fixed doesn't seem to be an option. I can personally qualify for conventional on my own though.

The local bank only offers 3.73% 3 yr balloon or 4.5% 5 year balloon. They say it's just a simple real estate valuation to renew it but of course it's still renewing it. Down payment is 20%.

I'll look into building codes.

The cash flow numbers look better w/ a 30yr conventional at 4.5% even with 25% down. ROI still comes out fine especially if just raising the rents $25 a unit a month. may just have to scoop the two up and then get back to splitting properties with my partner, which will bring me up to 4 mortgages.

Hello

first post, though I've been lurking for a while now. I am working on closing on my first deal in real estate right now, though I did own a couple rentals years ago. First multi unit as the previous ones were small SFH.

Anyway, the numbers are good on this first one no matter what I stick in, but now I am looking towards what is next so I want some feedback on these numbers for a 4 plex. The numbers looked good for a while but as I've modified and tweaked them they just aren't looking so great any more. I'm not sure if I've gone too conservative, these rents are simply low, or its just not a good move.

The list price is/was $175k, though it is currently off the market for now. They have been trying to sell for a while now. The current owner is out of state and purchased it in 2004 for $164k. Two of the 4 units have been recently renovated.

I am budgeting $165k price, 3k improvements (condition seems fine), $8,250 closing (5%).

Mortgage would be through a local bank, 4.5% w/ 5 yr balloon, 20 year amortization. Payment comes out to $835.

Gross rents for $1,950 monthly or $23,400 yearly.

10% Vacancy $2,340

Property Taxes $1,850

Insurance $1,200 (guess)

Maintenance & Repairs $2,100 (just used 10% of gross rents)

Utilities $800 (water + sewer + trash - estimate, though I'd have to double check to make sure this is in fact paid by landlord. Going on the assumption it is.)

Advertising & Admin $250 (more of a misc buffer costs)

PM: $2,948 (14%), though it is fully rented and actually it'd be 50% first month and 5% PM using a combination of my father who is local partially managing it and me dealing w/ some remote internet marketing.

So actually PM I would be using would be based off 5% ($1053) + $400. Just another estimate.

So with the 14% PM estimate the NOI comes out to: 12,077 (48.39% gross)

W/ the actual PM the NOI comes out to: 13,572 (expenses 42% of gross)

So with these numbers currently cash flow is very low, $150-$300 w/ ROI at 4.65% to 8%. With equity considered the total return comes in at 14.92% to 18.3%

There is a coin laundry on site, no revenues are included from this. One downside to the property is no off street parking and while the area isn't busy, there is no on street parking on the street. There is an used parking lot next to it which spots can be rented from though. Currently its fully rented and none of the tenants have cars.

Lastly, its proximity is very close to a small college, though in a slightly worse area. Though this is "small town" worse area which I don't consider much of a problem. The rents seem a little low, but the 4 plex is only 2800 sq ft so the actual apartment spaces sound a little on the small side for a 4 plex.

Anyway interested to see what everyone thinks about my estimated numbers and at what numbers this deal would work. I am also looking at a similarly priced deal w/ rents a couple hundred higher too, so I can apply the feedback to this one too.