All Forum Posts by: Paulina Purnama

Thanks for the reply Christian. It is for a buy and hold, BUT man, I just don't get a good feeling inside that I am overpaying for something. I know in the long run it might not matter but there must be a reason the appraiser came in low?

Cash flow isn't even all that great if I calculate cap ex into the equation.

BTW seller refused any type of concessions.

Yes Matt, since it is an investment property non owner occupied they require 30% down. That is the best I could find. I found others with 25% down but rates were much higher.

Hi guys, I'm sorry if this post does not belong in the Deal Analysis but I'm a first time investor and finally got out of my anaylsis paralysis and made an offer on a 3 plex (converted single family).

I used conventional bank financing. 30% down with 4.375 rate, $2000 closing costs. Everything was going fine but today appraisal came back at 7.6% below my offer.

List price $169,900

Accepted offer was $164,500

Appraisal came back as $152,000 sales comparison approach. He did mention Income approach was $158,000 but he did not think that was the way to appropriatly appraise this property.

I went back to the seller at $152,000 and he refused. His final offer was $162,500.

Now big question is do I pay the difference or do I walk?

I'm already out $750 for the appraisal and $500 for home inspection.

Here are the financials on the property:

It is a older SFH that was converted to a 3 plex. Built in 1957.

Unit 1: Rents for $825 and than INCLUDES heat and electricity

Unit 2: Rents for $550 and INCLUDES heat and electricity

Unit 3: Rents for $700 and that only includes heat (electric is on separate meter)

So total income is $24,900 - 8% Vacancy = $22,908 annual income.

Annual heat (for all units) + electric (Units 1&2) = $3900

Maintenance I assume 10% of gross rents = $2490 

Property Management @ 10% = $2490

Lawn and snow = $1200

Property Insurance = $1400

Real Estate Taxes = $1365

Cap Ex reserve = 10% of rents $2490 (does cap ex figure into cap rate?)

Any advice would be much appreciated. Should I walk? Does the income justify me paying over appraisal?

Wow, where can I find a deal like that????! 

I'm barely getting anything with 6% cap rate in my area.

Congrats on a superb deal!

Thanks for your reply Stephen! Good points but his sales price is also NOT based on a NEW gas water heater. If he paid for the upgrade then he can say that the projected utility bills will be $3400. So i'm going to wait till we get the inspection next week and see what else needs to be repaired and I can bundle that to hopefully renegotiate the purchase price.

Hopefully that works. But in my area right now its a sellers market and i'm not sure he won't just let me walk away and find another sucker.

How are you making 10-20% in the stock market?

So after using the sellers pro forma numbners I placed on offer and it was accepted.

I asked for the routine documents including leases and utility bills. He provided those and included the bills for the last 3 years.

On his pro forma data (which I used to make my calcuations) he put avg yearly utilities to be $3400. On this actual data the past three years worth of utilities has been $3600 in 2012, $3800 in 2013 and so far this year projected to be $4300 (data for nov and dec were projected based on past few years)

So no I'm looking at about $400-$500 more per year in utility expenses that he did not previously disclose.

Is it worth to fight this? He said that if I convert the electric water heater to gas then the bills should drop.

Any advice? Walk away from the deal or re negotiate?

Thank you!

Thanks for the reply Josh. I guess I'm at a high marginal tax rate so any income I make with rentals I can deduct depreciation and interest up to zero net income (unfortunately I do not quality as a real estate professional to deduct my own earned income)

Even though its not much it is still less taxes that I have to pay than if I did not own a rental property. Plus I can deduct cell phone, office, paper, supplies things like that that I otherwise would not be able to. 

Any other thoughts on the deal? 

Thanks Scott, that calculator is very in depth! 

Hi guys, I'm interested in a 3 plex close to the downtown area I'm in. Lots of old houses but the surrounding area is going through a re build and lots of historic houses in town.

It is a older SFH that was converted to a 3 plex. Built in 1957.

Unit 1: Rents for $825 and than INCLUDES heat and electricity

Unit 2: Rents for $550 and INCLUDES heat and electricity (city program where rent payment is pretty much guaranteed every month)

Unit 3: Rents for $700 and that only includes heat (electric is on separate meter)

So total income is $24,900 - 8% Vacancy = $22,908 annual income.

Sale price is $165,000

Seller states annual heat (for all units) + electric (Units 1&2) = $3400 (I am in the process of verifying via his bills)

He did not give a maintenance cost but I'll assume 10% of gross rents = $2490 - Is this reasonable for a older building?

Property Management @ 10% = $2490

Lawn and snow = $1000

Property Insurance = $1400

Real Estate Taxes = $1365

He recently did some cosmetic upgrades (most baths and kitchens are newer) and also upgraded an old oil heater to electric heater.

Roof is on the older side probably 15 yrs old.

He also did some water seepage / drainage work recently putting drain tiles and land fill dirt to slope the water.

Would this be a good first property?

My lender requires 25% down for investment properties and I'm getting 3.75% for 15 yr loan vs 4.375% for a 30 year.

First off is the property a decent deal and second would it make more sense to go for the 15 yr or 30 year? I don't need the cash flow. This would be for buy and hold and to minimize my tax burden

Cap rate: 6.52%

Cash on Cash @ 30 yr loan: 7.74%