All Forum Posts by: Pete M.

@Steve French Hello from Issaquah!

Unfortunately I can't help you on the ATL front; sounds like you've already found that subforum and reached out, which would be my recommendation.  I believe Pro members can also search for members in specific zip codes.

Any reason you're looking at SFHs and not small MFRs (2-4 units)? I'm currently looking into a small MFR here in the PNW to get my feet wet and build some credibility for moving into apartment complexes.

Thanks.

@Jay Helms Thanks for the info.  My goal with a first property is to achieve some cash flow while getting my feet wet.  While I certainly want positive cash flow (and hopefully appreciation) on the unit, one of the biggest values to me is the firsthand experience I'll gain in figuring out how to acquire good investments and successfully transition them into a portfolio that requires minimal input from me.  From there, I hope to start scaling into apartment units with a positive track record, a working system, and a network of people to make it happen.

Thanks.

@Andrew Kerr

The major systems in the house are relatively new, it seems. Sounds like the roof, HVAC, and water heater are all ~5 years old, so I'd hope the maintenance costs on those systems would be minimal if at all. Either way I'd budget some CapEx money away for the unforeseen, probably $150-$200/mo.

As to the offer, my understanding is it's $290k firm (which I found out does include all closing costs and the broker's 3% fee).

The inside is definitely a converted house.  The main floor has hardwood floors (obvious signs of wear & tear, but not so bad that I'd refinish them) and some areas are carpeted (definitely need to be cleaned).  They have 2-3 dogs plus some cats in there now, so there's an obvious pet smell, though not as bad as I would expect with that many pets.  The main unit (3bd/1ba) has the "master" in the finished attic, and walks out onto deck on the backside.  Some deferred yard maintenance, mostly some shrubs/bushes that need to either come out or be trimmed back (there's a large pine slowly swallowing a playset in the backyard).  Main unit is ~1750 sq ft, which is a good size for a 3-bed.  Good character in the main unit.

The downstairs unit (currently 1bd/1ba) has tile and carpet flooring, and is about 1050 sq ft--very large for a 1-bed unit, IMO.  Not sure if it could be converted to a 2-bed or not; there's a window in the living space now for egress, but would have to check the local code requirements.  They also did a cutout in the wall to open that space up a bit, so it'd be awkward for a bedroom.  I wasn't thrilled with the layout of the downstairs unit, but it's functional.

All-in-all, I'd likely add $10k to the initial outlay to cover painting the entire interior & exterior (exterior hasn't seen a new coat in a while), and to do some cleaning of the interior.  Grout needs to be cleaned up in the downstairs unit, for example, and there are some missing outlet covers.

My biggest concerns would be whether tenants would actually pay the premium for the extra sq ft of the units, whether it will truly appraise for a minimum of $330k after a 6mo seasoning period, and if this is really a good deal or the wholesaler/broker aren't leaving enough meat on the bone...

Thanks. 

Hi all,

Connected with a MFR broker (investor himself, too) who brought to my attention an off-market deal for a duplex in Tacoma, WA. This is in the South Tacoma area, 98418 zip. I'm leaving in about 30 mins to go see the property. This home was last purchased in 2012 on a VA loan, and the owner(s) were transferred the following year (property tax site says they currently reside in VA). This broker says the property will appraise for $330,000 minimum. Bit more directly from the broker:

"This home was purchased with a VA Loan in 2012 and the owner got relocated a year later. Due to the strict lending requirements of VA loans, the home is complete updated and has new Romex electrical and electrical panel, new copper plumbing for hot and cold water line, new black abs drain lines, new main drain line, new sewer line, new composition roof, an I-beam reinforced deck, and more. Cosmetically, there is very little to do. I recommend an interior and exterior paint within the next year."

Ask price: $290,000

Unit: 3/1 (1850 sq ft) & 1/1 (1050 sq ft)

Built: 1925 (shows Adj. build date of 1961)

Current gross rent: $2750/mo

Below chart provided by broker:

Seems like he's assuming 5% for maintenance, about $3348 for taxes (which is in-line with county tax site), can't speak definitely to insurance rate, but seems reasonable, 5% vacancy, and 10% for PM. To me, seems like he's missing an expense for CapEx.

My outstanding questions for broker:

-Condition/age of HVAC & water heater

-Does that $290k include closing costs (not separately itemized on his sheet)

-Who is currently paying for electric bill? (Believe water/sewage/garbage are paid by tenants, but unclear on electric)

-I don't see any item listed for CapEx... seems like a big miss to me in his cash flow / CoC calculations

-Does it require flood insurance?

-He mentioned he got this lead from a wholesaler, and he tacks on 3%; is that already factored in to the $290k price?

-Why remove vacancy cost from Cap Rate calculation?

What other questions should I be asking? What do you all think of these numbers? My napkin math of CoC came out lower than his 12%; if I set aside about $200/mo for CapEx, that lowers the annualized cash flow from $8773 down to $6373, which puts the CoC at 8.7%. Could be even lower if we have to put some more money in for repairs, paint, etc.

Is Cap Rate even a relevant metric on this kind of property?  I've heard typically not since these small MFRs are valued based on comps.

Thanks.

Thanks, all.

@Andrew Junquet for reference

Hi all,

Working on building out a pipeline in the Irmo/Ft Jackson/Columbia area.  I'm working with a couple partners, one of whom is local to the area.  While we're identifying banks and lenders to work with, I'm hoping to connect with local wholesalers in the area.  If anyone on BP is a wholesaler in the area, or has a recommendation, please reach out.

Thanks!

@Ike Hobbs I think you have to be connected with that person, or they need to have posted in the thread already... or I could just be spreading misinformation.

@Jacob Evans Will do, and thanks!

@Mark Krier  Good to know, thanks!  Mostly focused on smaller MFRs at this point, but larger apartment complexes are on the table in the future.

@Casity Kao Seems to be a common story in most places (investors flooding in).

Any common areas on the outskirts of GR becoming popular/hot spots for those looking for cheaper housing, or are prices still low enough that people aren't fleeing to the outskirts quite yet?

Thanks.

@Account Closed Thanks, I was wondering if/when Everett might come up!  Do you manage your own properties up there, or use a PM?

What kind of cashflow (after PITI + all other expenses) should I be reasonably expecting? Listening to the podcasts and talking to others, it's all over the map...