All Forum Posts by: Andrew Michaud

Many of the tenants pay own utilities. What I would be paying in electricity, heat, property tax, insurance, snow/lawn, water/sewer, internet/cable for traveling nurse units, trash, and 3k considered for repairs is about $16,000 in total expenses. Mortgage will be about $20,000 per year. That is $36,000 in total expenses. 30k net income before tax time

@ThomasVisaggio all of the units are full, all long term tenants except for 2 of the 8 units. The 2 units are currently rented out to travelling nurses. Property is in great shape I would say

I am looking to purchase an 8 unit apartment building in a good area. Purchase price is $350k, with 20% down puts me at $70k invested (before closing costs) and $280k financed for 15 years. Property gross income is $66k/yr, net income AFTER mortgage is about $30k/yr with room for repair, vacancies etc. I feel like this is a decent deal, getting about 45% cash on cash return per year and getting initial investment back in a little over 2 years while mortgage is being paid for by tenants etc. I feel like the numbers work but I am a little sticker shock on the purchase price. Thats a lot of money. Tax value is right at 350k, so it seems to be a fair price. Just a lot to bite off. I'm a little concerned if I purchase this one, that will keep me from purchasing more next year once I get a whopping 280k owed to the bank. I know many surpass that x10 but it just seems like a lot of money. After 2 years I get to put about 30k in my pocket and after 15 years I could have $450k net from this account plus 280k mortgage paid off. Price still worries me a bit as its a lot of debt to be stuck with for awhile. Thoughts on this deal? Thanks!!

Its not a high crime zone, but its a property that is kind of "out of the way". Its about 10 minutes from the main part of town. And the trailer park is right next door. This is a pretty run down trailer park with not the best people in it. But this property is mint for the price. And the numbers work great. My only worry is getting people in there, but the current seller says he always has the units full. There is worse areas in town to own real estate. My main concern with this area is its a little outside of town.

This property is a 3 unit apartment in excellent shape. All the major repairs have been done. This deal would be a private sale. I was able to talk them down to 60k, and after all expenses and debt services I will be profiting 9k per year.. numbers sound great to me but I am uneasy on the location. Its in a good city.. but it is 8 miles out of town, in a quiet area, but right next to a run down trailer park. Should I make the move? Everything works except for location.. But I have seen worse areas. Thanks!

@Joel Florek that is a great return on 3 units! I have a good feeling about this one. Thank you for the response!

There will be closing costs which I expect to be around $2500. My previous property was a 3 unit and closing costs were $2000, purchased under a commercial loan under the same terms. I know 1-4 units and 5+ units are different animals but this shouldn't change my expected terms as that was what they were on my last property which was commercial lending. I put in the loan application yesterday and waiting to hear back.

I have been doing a lot of research on what are key numbers to value an income property and determine whether its worthwhile. I have posted recently about this property I am in the process of purchasing and compared to the numbers I see floating around on other posts, I feel this property is either too good to be true on returns, I am running the numbers wrong, or this property is a gold mine.

Purchase Price $145,000

Down Payment (20%) $29,000

Mortgage (15yr/4.75%) $10,824

Rents (6 units)

Unit 1 - 4 = $675/mo

Unit 5 - $650/mo

Unit 6 - $600/mo

Total Monthly Income = $3950

Total Yearly Income = $47,400

Expenses (Annually)

Taxes - $2570

Insurance - $1200

Heat - $3200

Electricity - $2600

Trash - $600

Water/Sewer - $1200

Propane - $300

Snow - $800

Lawn - $800

Vacancy - $3000

Repairs - $3000

Management - Zero as I will be managing

Mortgage - $10,824

Total Expenses = $30,094

Income $47,400 - Expenses $30,094 = $17,306

CAP RATE after all expenses/debt services - 17,306 ÷ 145,000 = 11.9%

CoC Return - 17,306 ÷ 29,000 = 59.6%

Some may argue vacancies and repairs are low, but in my case, based on what I know and see with this property, I am confident in these numbers. The building is in great shape. Roof is 8 years old, all electrical has been updated, pellet boiler is 8 years old, vinyl siding, units are all in good shape. There is also a low vacancy record on this property as well as a waiting list (no section 8 in property, but its section 8 approved). Even considering being extra conservative and increasing vacancy and repair to $5000/ea, I feel this is still a strong return. What do you guys think? Am I under estimating or did I find a good deal?

I bought my very first piece of real estate 3 months ago. Its a 3 unit apartment I got a great deal on, awesome tenants and things are so far running smoothly. I have my eye on a second property. A 6 unit up for sale at 145k. I have the 20% down for this property but don't want to spend it otherwise my wallet would run dry and I don't want to be in that situation! So I am considering seller financing the down payment and financing the rest through the bank. I had no problem getting a loan on this first property, and owe 48k on it. If I were to buy this second property, I would owe $115,000 as well as owe the seller $29,000. I am mentally prepared for this second property but am a little nervous that I may be over extending as a new investor in a short amount of time. I could save another $20,000 to put me in a more satisfying place where I am happy to put a down payment from my own capital which would take some time but I doubt the property will still be on the market by then. What should I do? 100% finance this property and have just under 200k in debt on 9 units? I am 3 months into the real estate world. I say that as if I am inexperienced, but I am very knowledgeable and ready to take on a second property. My biggest concern is the great amount of (good) debt, in a short period of time, and whether I am over extending myself at an early stage. This second property preforms outstanding and I don't want to pass up this deal. $250/door per month at a very conservative pace after all debt services. What should I do??

Thanks for the response @John Leavelle, so I bought this 3 plex for 60k and put 20% down, 15 year mortgage, appraisal came back at 78k. I have since put a new roof on the property. I plan to refi in the spring with a reasonable expected appraisal value to come back around 82k without doing any additional upgrades. Would like a cash out refi which in this case I see pulling my down payment and a little extra out of the deal. 

What would you do? Good tenants currently, units are full. Should I leave the property alone, get my ROI, and worry about windows and doors after tenants leave at some point which could be next year and could also be 3 years from now. Or should I do the work now with hopes my refi comes back more, but have to put more money into the place up front before I have a chance to build up the capital from this property?