All Forum Posts by: Al Phillips

I own a property management company and manage about 115 properties.  A dear friend of mine has passed away and her heirs are now selling her property management company.  She has approximately 120 properties.  Does anyone have any idea what a company like that is worth?  They collect about $10,000/mo in management fees.    They would like to sell it and I would like to buy it but have no idea how much her company is worth.  

I am a professional property manager and my rule of thumb is to manage properties that are no more than 45 minutes from my office.    Any further away and it makes managing the property too difficult, especially if there are emergencies at the property or a problem tenant.  I live in a very congested area, however, so if you live in the outskirts of a city, perhaps a maximum of a hone hour day may work.

Thanks for the guidance @Joseph Gozlan and @Andrew Johnson.  I am thinking I need to do a little more due diligence and see exactly what kind of condition this building is in.  My other concern to your point Andrew is that if the market adjusts (and it is going to), where will I be in 5 years if the property has lost value and I am forced to refinance!!!

https://www.biggerpockets.com/buy_and_hold_results/300631

@Meghan McCallum

Thank you for your advise.  I have tried again to attach the financial analysis.  I like the idea of doing the property improvements and  then increasing rates.  The picnic table is a good one as there is a fenced back yard with nothing in it.

Sorry, I am not familiar with the cap ex.  I am researching that now!

https://www.biggerpockets.com/buy_and_hold_results/300631

@Meghan McCallum, I have updated the calculator with the purchase pricing (assuming the seller will take it).  I have also added the gas bill (ave is $200/mo., some months $70 and some months $300).  I also checked surrounding apartment rentals.  There is nothing available for over 50 miles in all directions.  Those that are available outside of this area are in the same price range and all include the utilities.  With that in mind, I may not be able to have the tenants pay all of the utilities...maybe just the gas or electric.  I would always manage the property myself as I have a management company now managing over 200 units.  I have also changed the calculator by using my own money for the down payment instead of using the seller 2nd that is available. This should entice the seller to accept the lower amount as he is getting more money at closing with no risk of default on a 2nd mortgage.  Thoughts??

OK,  I think I have the link copied correctly this time.

https://www.biggerpockets.com/buy_and_hold_results/30063

https://www.biggerpockets.com/calculators/shared/694070/e7ef1b7b-8cfc-471d-b450-3ba5d7b1224f

Hi Meghan,

I think I have attached the link to my analysis on the property.  Also, I discovered that two of the five units are 2 BR units but the owner has not raised the rents in the units because the tenants have been there for over ten year.  I just see a huge value added possibility here with low rents, separated utilities that are not billed to the tenants, and an exclusive market.

I am considering buying a 5 unit apartment building.  What should I expect to pay (interest rate) on a 71% commercial loan to a bank and a seller carryback 2nd mortgage to the seller.  The seller is willing to take a $40,000 2nd mortgage, interest only, at 5% ( $167/mo).  Is this a good rate?

Also, will a bank allow me to finance the complete purchase of $100,000 with the bank and $40,000 with the seller?

@Pattie Robertson 

Pattie, thanks for the advise.  Here is Michigan pretty much everyone heats with gas due to the temperatures.  Electric heat is very cost prohibitive compared to gas heat.  This building is in a small town with NO one bedroom rentals except this building and there is a waiting lest (as per the present owner) for future occupancy.  

My big concern is that it is one hour from my office not to mention I have never done a multi-family before.

posted 44 minutes ago

Al Phillips Residential Real Estate Broker from Utica, Michigan

I have found a 5 unit apartment building I would like to purchase. I owne a real estate company and a management company and own several of my own single family homes. This is my first attempt at a multi-unit. Please let me know your thoughts on this one.

Purchase price: $140,000.00. 5 1BR units     Total SF:  2,500

Owner carry back second mortgage. $40,000, interest only for 4 years.

Financing: $100,000.00 (commercial loan I think)

I will cover closing costs, after close fix up etc of about $20,000.00 (cash in bank)

Rents per year $37,000

Expenses per year: $22,179 (not including any financing costs)

The interesting part of this deal is that the units are individually metered for gas (heat) and electric yet the landlord pays these bills. I could purchase this property and start charging for gas and electrick and that would decrease expenses by about $550/mo

I wish I could figure out how to attach a link to this post of my analysis on the Bigger Pockets rental calculator.