All Forum Posts by: Ben Rodriguez

I have a few rentals in Yuma however, I bought before the post-covid inflation. Property prices since then have risen quite a bit along with interest rates. Rent rates of course have also risen but it’s difficult to find a decent place where the numbers will work. There are deals out there, but they’re generally older homes in less desirable neighborhoods, which may require some work. While the crime rate in Yuma might reflect as “high”, it’s really not that bad as compared to bigger cities. I have a couple of properties in or adjacent to some these neighborhoods and have yet to be notified of any crime occurring there.

 Thanks you Patricia!

Do I even need one? Is a CPA, bookeeper, financial advisor, and tax preparer the same person? Or do I need one of each? There's just so much information out there and too many "gurus" hawking their wares that it's entirely overwhelming. Can someone point me in the right direction please.

For background, up until last year I had a W2 job, owned 3 SFRs, one duplex, all of which I self managed, so I basically did my taxes myself using turbo tax. However last year there were quite a few events and now find myself needing a pro. First I sold one SFR, bought an 11 unit apartment complex, transfered to a different state, got medically retired, and returned home.

What I'm looking for is someone to do my taxes (still), but also to give me some business and financial guidance. Also, a general life coach would be very helpful and if there is one who is all of the above, even better!

Most of the existing tenants have expired leases and are now month-to-month.  There is one lease expiring in October and another in June of next year.  Both have water/trash included in the lease but not gas or electricity.  The remaining 9 units will take over all utilities and have rent increased in 30 days after notice, which I plan to provide immediately upon take over.  

Also, I forgot to mention that I can add an additional unit by converting a 4/1 unit along some unused storage area into a 3/1 and 2/1.  This would bring in an additional $750 per month in rent in the near future.

There is an 11 unit apartment complex for sale in my area that I believe has some value-add opportunities. However, this would be my first foray into a commercial multi-unit. I do have some experience with rentals as I have two townhouses and a duplex. I have $155k in liquid cash, access to a $55k unused HELOC, and my rentals have a combined $298k in equity of which I could pull approximately $152k if I refinance, which I'm considering doing.

As far as the apartments, the sellers are quite firm on $800,000 however, it only appraised for $700k (based on rental income).  A commercial lender is willing to finance the $700k with only 10% down, I would have to fill in the $100k gap out of pocket.  Further, there will be about $50k in major cap ex needed over the next 1 to 5 years.  The apartments are in a good area and fully rented with some long term tenants in place.  Current rents are coming in at $7150 per month.  These are organically below market rates by at least $125 per unit, being extremely conservative in that estimate.  However, with all that's going on these days, it appears comparable units in the area shot up between $200-$250 or more in some cases.  I hesitate to use those numbers because I'm not sure how sustainable they really are.  Gross expenses come in at $38k per year and includes approximately $8k in utilities which I plan to pass on to the tenants.  I also plan on reducing landscaping and water expenses by converting large, unused grassy areas to desert landscaping.  So to break it down a bit:

• Purchase Price:  $800,000
• Finance:     $630,000 ($700k - 10% down)
• Out of pocket:   $176,000 ($70k down + $100k gap fill + $6k financing expenses)
• Cap Ex:               $50,000 (over 1-5 years)
• Income:              $85,800
• Op Expense:        $38,000
• 5% Vacancy:          $4,290
• NOI: $42,290
• Debt Service:      $44,600
• Profit:                  -$2310
• Monthly:                 -$193
• Per door:                  -$18
• CoC: -1.3%

My finances: 

• Liquid Cash:       $155,000
• Available HELOC: $55,000
• Available Equity: $152,000 

Post-purchase value-add:

• Rent increase:       $16,500 (at $125 per month per unit)
• Pass on utilities:      $8,000
• Landscaping savings: $1400
• Total:                     $25,900

New numbers:

• Income:                $102,300
• Op Expense:            $28,600
• 5% Vacancy:               $5115
• NOI: $68,585
• Debt Service:           $44,600
• Profit:                     $23,985
• Monthly:                    $1998
• Per Door:                     $181
• CoC: 13.6%

As you probably noted, I don't have the full cash amount ($176k) required to cover the down payment and the sale price gap so I will have to borrow $21k from the unused HELOC. This will leave me about $34k available for emergencies for all properties until I can refi my current properties. Once I do refi, I plan to repay the HELOC. That would leave me with about $131k cash from the refi for the cap ex and emergencies. Also, refinancing will mean my current properties will barely cash flow. Keep in mind too that the rental increase I used is very conservative by today's market. The number I proposed is what the rents should be at regardless of the craziness however, I'm sure I can increase it by more and I will where I can as leases expire.

And if this doesn't seem like a good deal, or if it doesn't go through, how should I use my available cash?  I can pay off two properties with that amount.  Or should I hold on to it for better deals?  Should I still refi and pull equity?  Any advise will be greatly appreciated!

 Thank you Erin. I’ve already selected an inspector but if you don’t mind sharing another for future reference, I’d appreciate it! I’m still looking for a PM though so please do send me your recommendation. Thanks! 🙏 

 Thank you 

My offer was just accepted on a quad in Cleveland. Does anyone have recommendations on a good inspector, and also a reputable property manager? Thanks in advance!

I suppose the benefits they'd provide would be: being available to answer questions, access to his/her network and subcontractors, and generally helping me avoid the pitfalls of an inexperienced noob. I wouldn't want them to necessarily put their name on the build, just give me general guidance on that first build.    The location is not "great", it's an older part of town, but it's desirable to middle income families for proximity to schools, grocery stores, and the highway. It's for sure a great rental area, which is partly a reason for wanting to rent them rather than sell right away.  The area is relatively stable even for these current conditions.