All Forum Posts by: Alexander Wardell

@Mark Bookhagen I do not want to walk on the account of the water bill because I have reason to believe that issue can rectified with more suitable tenants. I am guessing what you are getting at is remove the current tenants ASAP? I could contact the agent and have at least the one unit with 9 occupants be vacant at closing. 

@Thomas 

@Thomas S. The only utility bill not paid by the tenants is the water bill. I will give a call to the buildings department first thing Monday morning and inquire about occupant limitations. I have a feeling they are not in compliance. Having the tenants pay for water is not common practice in the area I am looking. That does not mean I can't meter them out but that might affect my ability to find tenants.

Hello everyone, 

I am in the process of buying my first real estate investment property and I am hoping to gain some insight into a particular situation that I have found myself in today.

A little information about the property. It is a three family building all units with 3 bedrooms, 1 bathroom, 1 eat in kitchen and a living room and I would say the units are approximately 1050 sq ft each. 

As of now all tenants are TAW. I just received the schedule of leases and tenancy agreements and I was surprised to find out that the units are occupied by 6 (1 adult and 5 under 18) on the 1st floor, 9 on the second (2 adults and 7 under 18) and 6 on the third floor (3 adults and 3 children). 

We are planning to manage the property ourselves because we want to get the full experience before we start using a management company so we will have to address any issues ourselves. My question is obviously about the amount of occupants living in the building, in particular the 2nd floor which has 9 occupants. 

I guess I am looking for a "what would you do if you were in my shoes" kind of answer. We are going to purchase the property and we are very excited about it but we want to have a clear idea as to how we are going to handle the transfer of tenants and what will be the best course of action.

As a side note I call the water department for the town and I was told the building has an average water bill of $200 a month, yes that is $2,400 annually. I can assume this has something to do with the 21 occupants who are all bathing, flushing the toilet etc. 

Any insight will be greatly appreciated 

@Rahul Sunkavalli I will start off by saying at this price it would be a no for me. That does not mean it will never be a deal for the right price. 

First are you basing the ARV off accurate comps? You had mentioned something about self managing the property which would add $300 to your cash flow but you will also be more involved (job) and you might hate the idea of it after a month. Then you are left with very little cash flow because you need to hire a management company. Without management in place I would not consider $830 cash flow a month a good deal.

5k in repairs would suggest this property needs very little work. Is that accurate? Around $1,600 a unit will not go far so unless this is recently renovated property or has been VERY well taken care of I would reevaluate that repair cost. Since you are putting aside almost $650 a month for repairs and CapEx, I would think you are anticipating some work in the near future or the property is older.

There are so many what ifs and other factors that go into each property. The rental income seems a little off to me also. $3,800 a month would suggest you are anticipating each unit to rent for $1,266 a month. Or is there other forms of income involved with that number? Storage, Garage, laundry?  

At the current price and low repairs, you will be into the property for 82k. I am not sure if you have put an offer in on this property or you are just getting a feel for the market, but I would consider lowering the price to a number that would put a little more wiggle room. If the comps are accurate and it really only needs 5k in repairs I would lower the offer amount considerably. Maybe 330k? Some people will entertain the idea of getting 80% of their asking price so do not assume the worst.

Good luck!  

@Jeremiah Alston So I went through the same path as you when I first found BP. I thought Wholesaling was the best way to go but I quickly turned away. I am sure you will find your reason to move on with wholesaling or find another area to enter. Either way I did the whole handwritten letter route. I did not really write each letter but I used MyScriptFont.com. It is not easy and will take you a couple of hours to create a font that will look presentable but it works. You will have to edit each letter after you complete the template and upload it. You can create a pretty decent template with this site. 

I am not into wholesaling but if you really want to send out letter and try your hand at it this might be your first step. 

Good luck!

No link posted @Rahul Sunkavalli. Cant help without the info

@Evelyn Santiago Thanks for posting. I grew up in NJ and man my jaw dropped when I saw the taxes you are paying. I'm glad I missed out on that in my adult years. Anyways I have a couple suggestions, but I'm a newbie so take that for what it is worth. Your vacancy, CapEx, and Repairs are extremely low. With a 2% vacancy you are confident that you will keep every unit occupied for 4 years before a tenant turnover every time. If that is what you truly beleive will happen then go for it, but I would put at least 5%. I would also put 5% for repairs and CapEx. You have the cash flow to play with if all the other numbers hold true. I would also start your negotiations a little lower to try and buy with a little more equity. Good luck!

@Christopher Christian If your goal is to retire from REI then I would not delay any further. I know your income is limited but you have a long work history. Would you consider house hacking? Not sure how many MFR are in your market or if you are willing to commute a little further. There are so many ways to make it work, and people have done it making less.

To answer you question I originally started college in 2013 after separating from the Marine Corps and bounced around from criminal justice to business management without a goal in mind. I ended up getting my BS in business management and decided to go right into the MBA program offered at my college. The program began in January, which was before I started to pursue REI. To be honest I want to have as many options available if this REI venture does not pan out the way I hope. I am okay with entering the corporate world, or getting a job related to real estate but for right now I am focused on finishing up the MBA and landing my first deal!

@Christopher Christian Thanks for the post. 

I am sure you like hearing this, but it all depends on what you want out of REI. Are you looking for REI to reach financial freedom then "retire" or will you continue to work in the corporate world? I am currently earning my MBA here in Massachusetts, and I will say that it is A LOT of work. If you take a step back and take a realistic approach you will be neglectful on one of the three areas you are considering( Work, School, REI) and maybe even family. Do you think you can handle a full-time career, MBA program, and pursuing REI? Are you willing to put your REI goals on hold while you focus on your degree and advance in your career? Or are you okay with putting your effort into investing while you have a steady job and 60k less student debt.

If you purchase several investment properties in that two years it would take you to complete the MBA, would you rather have passive income producing properties or have 60k in student loan debt without any investment properties. I am fortunate enough to receive income from going to school through the VA, and this allows me to focus on school and REI while not having a 9-5 job. If things were different and I had this much passion for REI, I would delay the MBA in a heartbeat and reach financial freedom then consider returning to school.

That is my 2 cents!

Good luck with your decision.

@Sanae Speed this all depends on what area of real estate you are looking to enter. If you want to be real estate agent then start studying for your license and skip the wholesaling route all together. Wholesaling caught my attention when I first became interested in real estate but then I quickly realized how complex it really was and kind of sketchy to be honest. Wholesalers and real estate agents don't mix for obvious reasons. It sounds like you are wanting to get your license from your last sentence but if you are looking to get into real estate investing there is everything you would want/need to know throughout Bigger Pockets. Watch the videos, read the blogs, listen to the podcast and you will find what area you are interested in. There is no single answer for your question because everyone has different wants, needs, and goals. 

Good luck!  

@Adam L. If you have not linked up with a realtor who can provide you with accurate comps from recent sales you can use Zillow for the Z estimate, or look at recent sales in the area from the same site. I can't tell you what to use for the ARV exactly but I feel as though the 30k is not accurate.

My view (also new) on the vacancy is if I can expect more than 8% vacancy (1 month of every year vacant) than I do not want to invest in the area. I usually put 8% for vacancy to be conservative. As for the CapEx and repairs, that will depend on the property. What shape is the roof, hot water heater, and other big ticket items. If you have only 5 years left on the roof you will need to put more away for CapEx. The area I am looking at has houses that are more than 100 years old and with that I put 8% for each CapEx and Repairs, but like I said it will be based off the condition of the property. If you are comfortable with putting 5% for each then go for it. These numbers are very much property specific and also depends on what you are looking for in a deal. That is my newbie take and I hope it helps even a little.

Good luck!