All Forum Posts by: Paulina Purnama

Thanks guys for the advice! 

I'm just happy that I feel more comfortable running numbers and can get great tips from guys like you! 

I'm gonna bail on this deal. I'll keep looking out for more. 

Maybe I'll stick with the stock market!

Hi Bob, hard to determine market value since there are not many 8 plex apartments located in my area. The seller built the property herself with her husband who is a contractor. She is also a real estate agent. 

I think we are actually currently in a bubble due to the oil boom. That is why the prices are so high. They are projecting 30K influx of people to the area over the next few years. Many professionals. 

They have build a gluttony of newer apartment complexes in the area as well but I believe the older ones will still appeal to some folk.

I did "pad" the numbers a little to account for rainy days but it still isn't looking that great. Maybe the real numbers show a cap of 6% or so. Still isn't good. 

My main issue is that I have significant earned income and I need some sort of business to help offset that. I figured real estate would be that business but the tax advantages would not even be that great since I am over the income quota to write off my other income from investments but every bit less going to uncle sam would help.

Thanks Jordan! 

I know, I know. Cap rate is low but not finding much better in my area. Most are run down houses. 

Lots of hassle for barely cash flowing property. 

Your right, may not be worth it. 

Yes, first RE deal. Maybe I should start with a duplex. 

Thanks for the input!

Hi guys, I'm still a newbie but interested in a 8 Unit apartment building. 

Built in 1990's. All apartments have attached garage as well as washer dryers.

4 one bedrooms which rent for $550

4 two bedrooms which rent for $750

All currently rented with year leases. Few long term tenants.

Owner pays heat and water / sewage. Tenants pay electric. 

New roof 2012, new hot water heater in 2013, and boiler overhauled last fall. 

Decent condition in older neighborhood but vacancy rates have been about 4-5% in the last 3 years. Seller has provided last 3 years of tax returns.

Problem is the asking price: $725,000! 

I ran my calculations with a sale price of $650K. What do you guys think? I would have to obtain a commercial loan 4.5% fixed for 5 years with 25 year term. 

Purchase Price $650,000
Down Payment $130,000
Loan Term 25 Years
Interest Rate 4.50%
Principal & Interest Payment $2,890
Closing Costs $5,000
Gross Scheduled Income (GSI) $62,400
Vacancy Rate 8.00%
Number of Units 8

Pro-forma Income Statement & Cash Flow
Gross Scheduled Income (GSI) $62,400
Less Vacancy $4,992
Total Actual Annual Income $57,408
Gross Operating Income (GOI) $57,408

Annual Operating Expenses
Accounting $100
Utilities (gas and water / sewage) $5,000
Landscaping / Snow removal $2,100
Maintenance & Repair $4,000
Property Insurance $2,000
Property Management $0
Real Estate Taxes $6,000

Total Operating Expenses $19,200
Net Operating Income (NOI) $38,208
Annual Debt Service (mortgage payments) $34,684
Before Tax Cash Flows (BTCF) $3,524

Key Operating Ratios
Capitalization Rate 5.88%
Cash on Cash (COC) 2.61%
Gross Rent Mulitplier (GRM) 10.42
Net Income Mulitplier (NIM) 17.01
Debt Coverage Ratio (DCR) 1.10
Expense Ratio (ER) Per Unit 33.44%
Price Per Unit $81,250

Acceptable deal? I like the sound of having 8 units in one building. Less back and forth. Nicely updated but some appliances are old. 

I also did not count any capital improvements into the calculations since the roof and heater were recently updated. 

Is it worth it? My area is really booming and most investment properties available are 2-3 plexes and built in the 1900's. Very old. Lots of new apartments coming up but I think lots of working class folk will be priced out of those. 

I know the cap rate is kind of low but this would be a buy and hold situation. Will also offer some tax advantage since I am a high income earner. 

Any thoughts or help would be appreciated!

Anyone else chime in?

Thanks for the reply Austin.

One of the units was owner occupied. He is moving out, so that is why that one is vacant. The other vacant one is his brother who is leaving as well. The seller tried to tell me the rents were worth $700 but there is no way it could be rented for that much in my area. I had my agent find the MLS from last year when he bought it and it was listed as only $1585 gross rents per month. Current seller is advertising as $1900 gross rents per month but has NO leases to support that. He said he never made his brother sign a lease.

Even after filtering his crap is it still worth it if I can get it for what seller paid last year $145k with monthly gross rents of $1585 (which is doable in the area)? The house is actually nicely updated.

Also, would cash buy make any difference?

Thanks!

Hi guys, I'm new to investing. My first potential purchase! Having a little trouble deciding if this is a good deal for me or not.

I'm in Fargo North dakota. This is a three plex in a older neighborhood. House was built in 1910 but is nicely updated. Should not expect a lot of older house maintanence but I guess I never know.

Seller purchased last year for $145K. Had house inpection that showed a block wall (foundation) in basement is tilting in a bit but inspector just said to monitor it. No other major issues. New electrical as well.

Rents at that time were $435, $550, and $600.

Seller hasn't done much but is now asking $175k! Says potential rents are now $500, $700, $700. I called him out on this though.

I ran the current numbers through a calculator.

thinking of offering same as he paid a year ago.

What do you guys think?

You think he would consider less than what he paid just a year ago? He said he is moving out of town.

Currently his brother lives in one apt. The other two are un occupied.

Too risky for first time investor?

Also I can afford to buy all cash, would that make more sense or would it be better to leverage bank and obtain a loan?

Thanks for the help!!!