All Forum Posts by: Brenton Kasselder

So my Mom and Step dad are considering purchasing two 4 plex buildings in our home town. I'm just concerned that they are paying to much for the revenue they are getting.

They are listed at 210k each and hope to get them for 180k each and the gross revenue is currently 3,800 combined. Threre are 6 2bed 1 baths apts and 2 1bed 1bath apts. Here is the listing.. http://gihomefinder.com/listing.php?MLS=20130887 There are four new ac units and a new roof in 2005. They want to make the apts a little nicer and hope to get another 50/month for the 2 beds and maybe 30/month more for 1 beds. So that is a total cost of probably $15-20 because my step dad is a contractor and can do the work cheaply.

So the total revenue will be 4,160 per month for a total cost of $380,000.

My step dad will also be doing most the repairs and maintenance. There hope is that since he will be doing most the repairs etc that the cash flow will be much higher.

What do everyone think??

Dawn A.
I just think it would take a lot of complaning to make 8-10k worth my while. I am not saying I disagree with you entirely. ( I actually have included the 8-10k into my renovation costs) But I do want to fully explore the option of leaving it "as-is".The only thing I can think is that when i want to sell it in the future it will be very difficult to sell it without it being metered out correctly. I have to think that the house not being metered out correctly has a lot to do with it not selling for over a year. Not to mention the rest of the house is in rough shape. Without a lot of sweat equity it would cost a ton more than we will have to pay to renovate.

Matt Devincenzo I think its right for getting new ac unit/furnace and having them hooked upstairs as well as the place being metering out. Although I really hope your right so I don't have to pay so much for it, but that is the price estimate I got from two different General Contractors and one of them is my step-dad. But either way the numbers work if I do separate them.

@Dawn A. Is finger pointing really worth the price of fixing it though. If they signed the lease then they will be responsible regardless. The cost to that I think is in the $8-10k range...

I was just wondering if everyone could take a look at these numbers and tell me what they think of this deal???

My wife and I are looking at a Duplex right now, in order to rent one unit and live in the other for the foreseeable future (5 years).

The Purchase Price is $75,000 potentially, it's listed for $95,000 but with it having been on the market for the last 15 months the owner is getting desperate for an offer (says the seller's agent to me on the phone) and we will make an offer at $65,000 and hopefully we will get it for the 75k.

Unit 1: 2 bedroom 1 Bath upstairs apartment $600/month with renovations

Unit 2: 2 bedroom 1 Bath but potential to finish downstairs bathroom and Room with egress window etc. $745/month with renovations

It has a 3 car detached garage. Each unit gets a garage but we will rent the 3rd for storage unit for $40.

This is the listing

We will need to put about $30,000 in Renovation cost into it. Meter them out, central air to upstairs unit as well as another furnace.(We are considering just leaving it how it is and putting in the lease agreement that each unit owes half the utility bills on top of their rent, any experience with this issue will be greatly appreciated) Meter them out, new ac/furnace to top unit. VS. Lease states that each unit is responsible for 1/2 utility bills. (Electric, gas, water and, sewage.)

Other than that we will need to refinish the pine floors in Bedrooms/living room/hallway and tile in kitchen and bathrooms plus laminate in basement room. As well as redoing the kitchen counters, resurfacing cabinets and newer appliances. And renovating bathrooms and finishing downstairs Bathroom, bedroom, egress window and, laundry room clean up/paint etc.

It will cost less because the general contractor is my step-dad and will let me do all the demo and I can install new windows myself as well as paint and do a few other things like frame basement bedroom/rough drywall etc.

Btw the vacancy rate in Grand Island, NE where I am buying this is just 3.0%

After all is said in done with both units rented out the number look like this:

NOI: $10,745

Cash Flow: $3,389

ROI: 50.71%

Cap Rate: 10.23%

Cash-on-Cash Return: 50.7%

Total ROI: 137% Plus a little bit due to tax deductions on lnterest from financing.

We are getting an FHA 203K mortgage for $105,000.

COST ASSUMPTIONS

Purchase Price: $75,000

Down Payment: $3,675

Improvements: $30,000

Closing Costs: $3,000

Total Costs= $108,000

Cash Outlay=$6,675

FINANCING ASSUMPTIONS

Downpayment: 3.5%

Finance Amount: $101,325

Down Payment Amt: $3,675

Interest Rate: 4.75%

Mtg. Term (years): 30

Mortgage Payment is $693.05

What does everyone think of this deal?

@Joe G. Hey we didn't end up going with the place because it was purchased before we were ready to move in etc. We are currently looking into a nice fixer upper duplex though. I'll get a hold of you if we close on this property. Still have to have an inspector go through officially, as well as a few other financing issues.

Steven Hamilton II That makes a lot of sense. I'll do some more research/ put some thought into this idea. But I can see how that would make my situation much easier. Do you have any personal experience in owning and occupying a multi-family building?

Brandon Turner Just wondering what your thought on informing you tenants that you are just maintainign the property..etc. From Your experience in living amongst tenants would you suggest something along these lines. Or would you consider complete disclosure the best policy?

Joe Hartman Thanks for bringing up the utilities I hadnt even considered whether or not the units were metered separately. Definitely something I will add to the numbers upon clarification.
You know the management fee is something I hadn't planned on adding but I know I will be owning numerous properties in the future and I may not always want to manage them myself.

I'm actually pretty familiar with the place. My wife and I have went through it once. It needs some landscaping, which I would be happy to do. Other than that everything was in good order as far as I could tell. Other than a few coats of paint a broken screen etc.
It really is in good shape. On a big lot with lots of yard.
And I'd like to replace the single pane windows in the next five years or so. not so bad that they need immediate attention

I'll defintely tkae your advice on that first offer.

Brandon Turner thanks for the encouragement it's been a God send finding this website.
What would you say your biggest drawback was to this strategy?
Ill defintely check those articles out and let you know what i've taken from them as well as any questions that may arise. Thanks again.

Thanks for you input Uwe S.
I am extremely good with my hands I can do everything from tile work to rough construction and most things in between. Excluding major Plumbing work and anything electric, both of which I have very little experience and would rather leave to the professionals.

I don't have any experience managing people. But i am wiling to learn and study different methods etc. On the plus side I have plenty of time to devote to managing the actual property. Although we have a healthy income, I don't actually work and i attend a local University for just 12 credit hours a week. I plan on committing myself full-time to REI as I am considering doing this as a career. Coupled with my other income as well as my wifes.

I have been looking around and i'll use a real example of a home we were evaluating recently. It is a large 4 unit building. On the market for 158k and could reasonably expect an offer accepted in the 144-47k range given the sellers motivation. No recent offers and something like 4 months on market.
Unit 1 is a 1/1 currently leased at $500
Unit 2 is a 3/1 currently leased at $500 (basement apt.)
Unit 3 is a 3/1 currently leased at $650
Unit 4 is a 2/1 where we would live could be leased at about $575
Total Gross potential income is $26,700/yr.-VAC@%6= Effective Gross income of $25,098.
P&I=$7,716/yr
Plus maintenance @ %45 gives me about $580 positve cash flow per month and thats not including no PMI or property tax which I assume is usually factored into the %45-50 rule.
It's in good part of town and right across the street from the library which I think is a bonus.

I'm extremely nervous to start my REI and just not sure if something along these lines would be an "optimal line" given my situation......

I am 22 years old college student with a 90k salary with almost zero debt and a free college education.
My wife and I max out our IRA contributions monthly, and we're considering real estate investing in order to put to work our excess savings. I have a VA loan with 0% down, no PMI and a 3.4% APR on a 30 yr with no property taxes owed (as long as I am a primary resident) and almost no closing costs because I am 100% service connected. Something like $2,500 on a 200k purchase.
So I think we are in a particularly good situation.
We're considering buying a duplex/Triplex and living in one of the units for the next 5 years or so. With plans to purchase more rental properties in the future. I have done a strategic evaluation of our particular rental market and It looks promising.

I'd really like to know if any one has any insight into something like this? Any immediate red flags or constructive criticism's come to mind. Has anybody done something like this to start out? Are their questions I should be asking myself that I am not?

Any Advice would be very much appreciated.