All Forum Posts by: Brian Whitney

Hi Everyone,

I was offered a property that consists of a SFH that sits on one street and a duplex that sits in the "back yard" on another street. Currently the property owner has the SFH rented for $750/mo and the duplex is vacant and has been for quite some time.

The property owner wants to get rid of the property because he doesnt have the money to rehab the property. He has a mortgage with 23k balance and approximately 4 years of payments remaining. There are $4,500 in back taxes.

He offered me the property. I'm not sure that I want the SFH, but I would consider the duplex.

Being that he has a mortgage on the property as a whole, is it possible to essentially get the duplex on a separate deed, thus allowing me to purchase it and leave him with the mortgage on the SFH ?

Try Elite Property Management. 

@Andrew Johnson  I have been asking questions to everyone I can. My uncle owns 40 units and has been doing real estate for a long time. He's made plenty of mistakes and I am trying to learn from his mistakes. I am also a police officer and see first hand what tenants can do to these properties. I definitely have a ton to learn, but I am somewhat aware of what I am walking into. 

As far as the financing, I have about 25k in cash to start and another 55k in equity in my house if I needed to temporarily borrow from that.

Id considered buying some properties in the area that I work and currently live. I know the area street by street, I can keep an eye on the property and some of the properties are around that 50k mark, and its a very average neighborhood. 

For example, the duplex that I am strongly considering buying from a co-worker can be purchased for 45k. Its nothing fancy, but all the utilities are separate, and is in fairly good shape. I am looking at a cash on cash of 28%. It will cash flow $3,500 yearly and $4,700 yearly if I initially manage myself. I see that as a great way to get the snowball rolling. At least the way I have been thinking, but Im still open as to reason why another strategy may be better. 

My Chiropractor owns 9-10 units in a great neighborhoods that typically appreciate and have rents of 1200-1500 per unit; however, the buildings are 300-400k. When I briefly look over these types of units it seems they dont meet the 2% rule; a lot are barely 1%. This makes me wonder how I would ever be able to scale? 

My chiropractor suggested selling my house being that I am single and using that money as a great way for a down payment in one of these types of neighborhoods, but I am not sure how I feel about that.  

What are your thoughts? How did you get started and what type of units do you own?

Hi All, 

Just looking for some thoughts/opinions as I continue to look for my first property. I may be purchasing a property shortly, but I also have leads on 2 duplexes and a SFH.

As I continue to analyze properties, it seems that the expenses are eating up a large portion of the cashflow, especially when utilities aren't separated. 

Duplex 1 would cash flow about $105 per month at a 10-12% cash on cash because the utilities are not separated. The seller is asking 50k but I believe I can get the property moderately cheaper; however, whether I pay 40k or even 30k, its not going to change the mortgage payment much, thus not really changing the cash flow. In an instance like this, how do you decide if the property is a good deal? Im looking down the road at how to scale my portfolio and cash flowing $100 per month doesn't seem like the way to get there. But how would I justify passing up the equity if I can get a good deal on the property? 

Duplex 2 is a similar situation. The seller is asking 40k but it needs some rehab. Lets say I can purchase the property for 25k. Even if the property is rehabbed and there is equity in the property, Im back to the same lack of cash flow, but a good purchase price with equity. 

Finally, I can buy a SFH all in closing/repairs for 13k. The expenses are $425 and it rents for $625, renter pays all utilities except garbage and sewage. This property would give me cash on cash of 18%. But its not in a good area, and the seller has horror stories collecting rent. Even though the property is very cheap, I dont foresee much appreciation and would bet on a high hassle factor.

I guess it seems that if the utilities are not separated, its very hard to cash flow because you are not going to find the properties much cheaper. It doesnt seem like the mortgage cost is what is eating the cash flow. 

Any opinions on the aforementioned jumble of thoughts ?

Thanks in advance, 

Brian  

Anthony, 

The property is in the area of California University. The seller paid $65,000 in 2004. Based on the condition of the property, I wouldn't think he has had to repair anything major. He installed a furnace in 2007 that I know of. Electric, 1 furnace, and the roof definitely was not updated since he owned the property. 

When you say look at the income, that it will be in the 6-10% range. What are you referring to? Do you mean a monthly cash flow on the building?

Anthony, 

The property is in the area of California University. The seller paid $65,000 in 2004. Based on the condition of the property, I wouldn't think he has had to repair anything major. He installed a furnace in 2007 that I know of. Electric, 1 furnace, and the roof definitely was not updated since he owned the property. 

When you say look at the income, that it will be in the 6-10% range. What are you referring to? Do you mean a monthly cash flow on the building?

As far as lining myself up for the financing, I am hoping to find a lender that will allow for 20% down. I've been told 25% down is pretty standard, but one of my banks said for multi's it would be 30% down. Its gonna be tight on the down payment, but I will be able to make it work. Should I just start calling various banks and ask about their terms or is there a broker of some sort I should be looking for that will be able to help me find the best financing terms ?

Initially, I did factor in property management, but for some reason I forgot to put it into my original post. Assuming, a 10% property management cost and maybe increasing the CapEx to 15% that would adjust my cash flow to around $6130/year or $510/month. Depending on my purchase price that puts my cash on cash between 15%-18%. Any thoughts on that rate of return?

I've considered seeing if the seller would pay for the roof or at least receive cash back at closing to cover the cost of the roof, being that is the biggest expense I see coming down the road. 

I agree with everyone's thoughts on forecasting the property management costs, because in the long run I can see myself having mangers run the properties. In the short or mid-term, I plan on doing it myself because I need to learn what the heck I'm doing. So, at least in the short term, I will cash flow more like $800+ per month. 

Hello All, 

I've been reading a ton lately about real estate and I have been asking questions to everyone that I know that own property, but I still have a ton to learn. I have been eager to invest, but haven't quite found the right property. I recently found a property that I think I am going to put an offer on this week. I was hoping that I can give you all the information I have at this time, and get your opinions. I really want to see how far I can grow this real estate thing, but I want to make sure I have a solid first property. 

I came across a 4 unit building near a state college south of Pittsburgh, PA. As far as the building goes, Its a wood frame/sided building with 2 units upstairs and 2 downstairs. Each unit is 2b/2ba. The bottom 2 units were in good shape and the top 2 were in good shape but slightly outdated. The roof is nearing its life expectancy and will need replaced in a few years. It has 2 furnaces, one of which is from 1975. Finally it has fuse boxes instead of breakers. The roof estimate is ($9,500). I can have a furnace installed at cost (3k). And the electric should run about the same (2-3k). Nothing is urgent, but these are the expenses i see on the horizon. 

The location of the building is about 4-5 blocks from the entrance to the college campus. The seller says he always has 100% occupancy. When I scouted the property out, I was a little surprised noticing more for sale/rent signs than I had expected. Because of this, I pulled the enrollment numbers for the college. I went to school there from 2001-2004 and it seemed less populated. I found the the school had roughly 9,500 students in 2001 when I began school there. The enrollment has declined 20% since 2010 and is currently around 5,500 students. Enrollment in 2017 is up 3%. It seems a lot of the state schools had declining enrollment, and some rumors began of mergers. This particular college was founded in 1852 and recently had tens if not hundreds of millions of dollars in renovations the last 10 years. I am not overly concerned about the college going anywhere, but food for thought.  

The financial particluars: The 4 units rent for 750,750,850,850 currently. The realtor seems to think they are low relative to market, but for now those are the numbers I am using. The landlord also currently uses 11 month leases, not 12. 

The yearly expenses according to the seller are (I will ask for verification pending my offer):

Homeowners $2509

Flood $1325

County Tax $224

Boro Tax $308

School Tax: Waiting to hear but looked at millage and estimate $950ish

Utilities, trash, etc: $6,000 

mortgage: between 400-450 (depending on sales price) 

Using these numbers:

   $35,200 income

   $ 16,750ish expenses

   $ 18,450 profit (minus 5% vacancy?, 5% maintenance, 8% cap ex?)

It seems I would be left with $15,129 in cash flow or $1260 per month. 

The house is currently listed at 130,000. The seller purchased the house in 2004 and paid $65,000. It has been on the market for 165 days. It was off market but a prior deal fell through. I found that the seller is moving to Florida for retirement and is eager to sell the investment properties he owns. For tax purposes, the house was appraised at $97,500, but that is usually not necessarily in line with the sales price. The realtor seemed to hint to that would probably take at least 15k off his ask price; however, Im not ruling out a lower possible offer. 

Ive tried to list everything I know about the property. Id would GREATLY APPRECIATE anyone who is willing to take time out of their day to offer any thoughts, not only on the my calculations for the cash flow aspect of the property, but also some thoughts on making an offer, location near the college. The sellers agent, said she will do her best to find some comps, but that there aren't a ton of comparable properties that have recently sold. 

Thanks in advance!!, 

Brian Whitney