All Forum Posts by: Dave Bingham

@Matthew Delaney 

Hi Matt. Welcome to BP. Hit me up about a REIA I host if you're interested in coming. If you need anything there is a small group of us that might be able to help out. Have a great day!

Since there is no debt it's easy to say it is not included. It's been my experience though that the bank will include associated costs of that property as debt even though it is paid off. They may include things like property taxes, hoa dues, and insurance. Basically any reoccurring costs you have. Appealing to lower your tax assessed value, shopping insurance and reducing debt in other parts of your life can really help. When you change both the numerator and denominator just a bit it really changes the quotient giving you a much more favorable number.

@Brandon Duff 

Hi Brandyn. I think it's fair to say that the 50% rule is a function of your expenses of your investments over time, the size of the property and the condition of each individual property. The rule is there as a guideline. With older and larger complexes your expenses will most likely be 50-60% of your Gross Effective Income. If you're buying something smaller and newer these percentages might be much lower. On duplexes to ~20 units I have found the expenses to be about 35-40%. I'd still steer clear of anything that that has expenses as 34 or fewer percentage points on 2-20 units.

I imagine from your mortgage assumptions you've supplied that you're looking to go conventional. I'd say that your rate would probably be closer to 5.25-5.5%. At 5 units and not 4 or fewer many conventional banks might not be interested. They usually like 4 or fewer or really large deals. You might get lucky though. At 5.25% you're looking at payments of $790.76. Your PMI is part of your mortgage not your expenses. Property tax is part of your expenses.

It looks to me in a best case scenario you're looking at $49.35/door. This of course is completely ignoring economic vacancy and bad debt which should be tabulated at a minimum of 5% maybe more depending on your market. This is deducted from you gross scheduled income. So (2075*.95)=1971.25. This changes your number to $38.97/door.

Anything that has to do with rehab out of the state I'd check in with J Scott. I am amazing ignorant in that area and would just lead you astray with speculation.

Some people use rentometer to find out what rents are or call local realtors. I prefer the old fashioned way. I make a spreadsheet and call up the competitors in the market. Let them know what you're doing and offer to share information if they cooperate. Ask if they are having any move-in specials to quantify the supply/demand in the market. Who knows, maybe you'll get a lead on another property as a bonus.

When dealing with multi-family you really need to have an excellent handle on what current rents are like and what direction the market is heading. These factors are paramount when determining the valuation and viability of an instrument.

Your CCR would be about 4% based off of what I tabulated. Not something to get excited about. I think as you develop more experience it might be ok to base your decision on a pro forma (in this case buying 20% less than asking price) if you really know that market. Since you are out of state, don't know the market and it's your first deal I'd not consider that at all in my decision to more forward or not. Base it on what you can verify and the worst case scenario. Making assumptions that are rosy will get you separated from your cash quickly. Be more conservative. You'll pass up a lot more deals but you will mitigate damage should you find yourself in a storm when you finally do buy.

@Bill Schollmeyer 

That sounds fun. I think many of those same skills will behoove you in real estate. Reach out if you need anything!

@Bill Schollmeyer 

Welcome to BP. What areas of specialty do you consult clients on?

@Barbara Long 

Hi Barbara. I'd recommend doing what @Mark Brogan friend did. I did the same thing and have met a lot of quality people on our first meeting. We have another scheduled for the end of February due to the first meeting's success. I reached out to @Doug Merriott and he helped me out with the format. He has had his own for some time now and was gracious enough to let me know about how he conducts his meetings. I'd suggest going to other local REIA's to get a feel for how you'd like to do yours. Then just reach out to others on BP that are local to you. I did mine at my house as I have some space for these types of meetings but you can check with local community centers or restaurants if you're lacking a meeting spot. (This also gives you an opportunity to meet a manager/owner of an establishment and talk about what you do!)

If you want any specific tips or if there is any other way I can assist you please pm me and I will be happy to help you out. Have a spectacular day Barbara!

@Doug Merriott 

It's no sweat! Ill pm you details of the next one. Going to try really hard to make it Sunday. I have a biking excursion that morning. I'll have to tell them to hustle!

@Scott Le 

Hi Scott. I'd find out who is buying the houses from the courthouse records. Contact them. Offer to help them out in exchange for information. I'd wager that at least 50% of them have refinanced. If they are willing to work with you then you can get the mortgage information from the bank. This will give you an idea of what the banks appraiser feels like it is worth anyway. Ask to speak with the appraiser, take them to lunch. Ask about how they reasoned through that valuation process. gaining this information can give you a decent baseline to determine if your own ARV and comps are reasonable.

@Shawn Root 

Hi Shawn. I could only guess that expenses are going down because they also replaced items such as appliances, ac units, etc. Even if this is the case though, you'll still have these expenses in the form of your reserves. I personally wouldn't buy a property that is going to shift all those expenses on me and lower the value of my building. I'd look at making an offer based off what you think your expenses would be, not what the seller is providing.

Here's a dandy little spreadsheet from the resource section to assist you.

http://www.biggerpockets.com/files/user/OracleofMN/file/112-pro-forma-template---small-apartments-v7

@Gina Shields 

Welcome to BP Gina!