All Forum Posts by: Brandon Turner

Hey Everyone. My first major deal has come across my plate and although I've read every book under the sun about buying apartments, it is still a big step. I thought if anyone is up for the challenge, they can let me know if this is a good deal or not.

The apartment is 24 units. A friend of mine bought them new 22 years ago, owned them for around 15 years, paid them off, then sold them will seller financing 7 years ago. He is now foreclosing and will take back these apartments in 3 weeks. We have been discussing this for some time, and now I need to decide. He has offered to sell them to me for 580,000, if I can come in with only 25,000 to pay the back-taxes. This is his retirement, and he wants someone he trusts to buy it. The following is the info we have:

24 units (6 4-plexes surrounding a parking lot); average rent 475 per month = gross rent 11400/month, $136,800 per year.

only 17 units are rented (actual rent: 8075/month, $96,900 per year) . the others cannot be yet, due to their condition. The owner stopped caring for the properties 1 year ago, so when tenants moved out, the units were never prepared for new tenants. The exterior needs paint and some small siding repair (which I can do myself) and the parking lot could use some patch work. One unit is gutted to the studs, but the rest just need carpet,paint, etc. If I got this apartment, I would move in for the first year and spend my time fixing the units up one at a time, getting them rented as I go – hoping to have the whole complex online and running smoothly within one year's time. I expect the cost of materials to fix this place up to be around $30,000. So I will need around $55,000 total invested. I plan on borrowing this from either my parents or a partner (if I can find one).

Using 50% rule, expenses (not counting the cost of getting the vacant units rented) will probably end up running around 5500 per month, or 66000 annually. I did a more detailed analysis of expenses, and came up with about the same amount when I include 8% monthly maintenance, 10% property maintenance, and eventual 8% vacancy rate.

So possible NOI could be about 70,000 - so with a 8.5% cap rate (my guess at average in the area for a nice complex) the value could be $833,000 . However, AS IS, with an 8.5% cap and NOI of 30900 the value would be 364,000.

So I know that "they" say never pay for an apartment based on what it "could be" but rather what it is right now. However, my friend who is selling it to me has offered the following option for the 555,000 mortgage payment: first year $2000 per month, second year $3000 per month, and third year and beyond, 7.75% APR which equals out to about $4000 per month. This way, hopefully some of the repair money can be made from the cashflow the first 2 years.

Also to complicate things, the apartments that are renting for 475 would be able to be raised without much trouble to 525. Rents have not been raised in years and 525 is very much market rent - if the complex had the needed repairs and management in place.

So the big question is: Is it worth paying more than its worth because of the relative easy financing, low down payment, and having a step up mortgage for the first few years?

So, that's the situation. From almost every angle, I like it. But maybe someone else has different perspective. I feel like with only needing $55,000 total invested (none of which is my own money), I can own this apartment which cashflows at every step (according to my calculations). Let me know if I left out any vital information!

Hi, does anyone have an estimate for the cost of basic insurance on a 24 unit apartment complex - worth around $600,000-700,000 built in mid 1980's, concrete foundation decent condition (B-C Grade)?

I know this number will vary greatly depending on a lot of factors, but I'm just looking for an average and ballpark. Thanks!

Hi, I am working on refinancing a rental property. I bought the home with a Hard Money Lender and meant to flip it. Didn't happen. But I got some good tenants who pay the mortgage and then some. So I would like to refinance this property and hold on to it for a few years. I have a few options, and would love anyone's input on what they would do.

I owe $43,000 to a private lender, and roughly $60,000 to my father's Home Equity Line of Credit(we did this flip together, but only I am on title. He doesn't have a lien or anything). The house is worth around $130,000. My main goal is to get long term financing that will free up as much of my dad's H.E.L.O.C. as I can (hopefully all of it). (and this would be a "cash-out" refinance because my dad's HELOC is tied to HIS house, not the rental)

The problem: I don't have document-able income. I left my job as a banker, so no one will give me a mortgage. My father does have good income and good credit, but again, he is not on title.

So, as I see it, I have 2 options.
1.) I could sell the property to my father, and he would purchase it from me with a new loan. It would then be his. However, he would have to put down 20% for a down payment. Banks (it seems) won't allow just 20% equity, but actually need 20% physically paid. But he doesn't have the 20% (because its all tied up in the HELOC which is being used for the house, which will be free once the refi is done). Its just a weird situation I think.

2.) I could also add my father onto title and then just refinance it. However, adding him would trigger a "due on sale" clause from my private lender. Also, banks usually have a "Seasoning Period" - a length of time a person must be on title before refinancing - usually 6 months. I don't have 6 months. I have 3.

So, that is the situation. Any questions, comments, or names of institutions that would do something like this would be great. I'm sure there is a solution to this problem, but I just haven't figured it all out yet. Thanks!

haha, i knew I would get some objection :) I'll do my best to offer my responses, but even I know they sound a bit odd.

I am on title cause I don't think he could do this alone, as the HML probably won't want to give 100% of money and repairs to a guy who hasn't done this before. I agree, he needs to get his finances in check (they had a baby, wife had to stop work, now only one income, typical story. I'm making him watch and read some Dave Ramsey stuff:) ) but as weird as it sounds, I think this will actually help that. (his current rent is 600 per month, plus 300 for the truck payment. his new cash-out refi will be like 600 total including most house expenses. plus the equity and no truck payment).

in case someone is wondering, the reason he isn't just doing a fha remodel loan is the lack of down payment, high dti, etc.

I don't actually "know" he can get the cash out refi, but I was a loan officer and know that ltv, dti, and all those other things line up right. Also, I plan on having him get officially pre-qualified. Plus, I did this exact thing 3 months ago with USBank and they gave me a cash out refi, and i was in a worse state than him (equity and good credit but no good documentable income)

As for why, there are a few reasons.
1.) I told him I would expect to get paid something for the hassle and any labor, probably a couple thousand. I know its not a ton, but oh well. It will keep me going another few months.
2.) he is my best friend and his wife is my wife's best friend (i know this isn't the best reason, but hey - it counts for something)
3.) (most important) I told him I would ONLY do a deal with him if the deal is good enough that I would win bigger if something went wrong. So we agreed that if they could not/would not refi, I would just do what I usually do and either sell it, rent it, or rent to own it and I like the 40-50k in equity I could potentially have.

and finally, I think I just want to do something. Nothing is selling for me, and it would be nice to actually complete a deal, rather than just keep acquiring assets (though there is nothing wrong with that).

Also, the HML only charges 10% interest and a 2 year note. So my friend has 2 years to actually get the refi. He's level headed enough to do it (I hope).

Thanks for the responses. Keep them coming.

This is a deal I am working on now. Not for myself, but for a friend. I thought I would post it to see if anyone had any comments or suggestions.

My best friend Adam was looking to cash in on this stimulus money thing and get a house, but has no money for a down payment, awful debt-to-income due to a high truck payment, but a steady (low paying) job and good credit. So we worked out a plan that we are in process of doing now.

I have done a few flips with a hard money lender, and currently have 4 notes with him that have a good deal of equity. So my friend Adam found a house in need of a good amount of work to be done and got in under contract for 29k. We are purchasing the home with three names on title -mine, Adam's, and his wife, with the hard money lender I use - including 15,000 for repair costs. Once we close, I will do the normal paint/carpet/etc to get it in good shape and Adam and his wife will move in. I will then Quit Claim myself off the deed, and he and his wife will then own this house for $50,000 total. He will then get a refinance (USBank and others offer a no-closing cost refi that is fairly simple) for $65,000 which will pay off the truck - leaving my friend with a house worth $90,000, a mortgage for only $65,000 and no truck payment - making his Debt-to-Income much more manageable and enter the world of a homeowner.

Hey, as everyone else said, just dive in. I went to my local library, which is connected with a dozen other libraries in the region, and over the course of a year I read every book on Real Estate they had - at least a hundred. Some were crap, some were great. I also found a lot of sites on amazon that sell books for under $1 (thriftbooks, etc) and you just pay shipping. Thats an excellent way to cheaply add books to your own library.

As for specifics, one of my favorite "well rounded" book was "The Unofficial Guide to Real Estate Investing" by Spencer Strauss. "Buy Low, Rent Smart, Sell High" by by Scott Frank, Andy Heller has a great easy plan for lease/options; and the richdad advisor book "The ABC's of real estate investing" by Ken McElroy was an excellent overview of apartment buying and building great wealth.

Then as Josh said, dive into the articles and forums here. Its great!

Hi, I've used PEX in several flips and rentals, and absolutely love the stuff.

I found that Home Depot caries a PEX tool which only costs $30, but requires the use of your Vise Grips (which most handymen should have several). I found this tool works great, but takes a lot more muscle to work (to squeeze the copper ring closed). But for those who don't mind the extra work, its a cheaper way to go but works well.

Also, I've been able to completely re-supply an entire house (with a crawlspace) in half a day - without a single leak. I don't think even professional plumbers can say that with copper.

I've spent a few months reading articles from the site, and more recently the forums. I thought it was time I actually signed up.

Banking. Its been great to learn how underwriters think in doing a loan. To come at it from that direction is neat. Maybe I'll write a blog or article or something on it sometime. But learning how to get loans approved by getting all the numbers lined up will greatly impact me - such as making sure Debt-to-income is okay, learning how to boost credit scores, the simple fact that business credit cards don't report on one's personal credit report (except the initial inquiry) unless its in default, which then can incredibly effect Debt-to-income because no other creditor will know I have $10,000 of debt on a home depot commercial card, and more.

Hi there anyone and everyone. My name is Brandon, and the lovely lady in my photo is my beautiful bride Heather. I started flipping a house (fix & flip) to make some extra money to go backpack Europe for a summer - but ended up spending all the money on my wedding. So rather than Europe (which I am still planning), I found a career and so much more. I fell in love with every aspect of real estate, read every book my library had on it, and then just jumped in. Recently I ended up taking a part time job as a Banker to pay the bills, which has given me a whole new perspective as well. But I'm now a landlord of several properties, fixing up two in my spare time to maybe sell, and trying to learn everything I can.