All Forum Posts by: Bryce Sablotny

A 30 yr makes sense for lowering your payment and reducing pressure if things go south. I need to figure what that 10 year gap between the two loans will cost me in interest. Do you find that to be a factor at all when deciding between the two loan periods? 

I do keep hearing on BP about some markets being tough and you have to "create a deal". I have been reading books and listening to BP for about 5-6 months now. I am constantly searching for leads and talking with my contractor and real estate agent. We are heavy on the search. My original plan was to flip houses but I do not trust the Illinois market right now with single family homes. I have changed gears into Multifamily and have been researching and gathering info for only 2 months. 

I am ready to commit and do a deal. Sometimes I feel like I want a deal so bad I get too attached. Now I know this is the opposite of how you want to approach the process. I have learned so much already in the search for properties and throughout negotiations on this particular property. This was my first full go attempt to purchase a property. I would be glad to inform you about my first deal (I'm sure you will be interest in the numbers). Thank you very much for your insight.

Bryce

I am not sure of the ARV. Originally, we offered 157K on the property that was my homerun number. When the counter offer came back at 172.5K we refigured and thought 165K would be the highest we would go. Once we walked through the whole property and found out we would need to change the Hvac system and need a minimum rehab cost of 10-15K per unit we backed out. I want to get opinions on how to figure some of the expenses and if I was missing any crucial info. I will figure 25% down until I determine which bank we use.

 Than you John for the reply. My initial questions are about the variable expenses. Vacancy, repairs, cap ex, and management. I do not full understand how to determine the correct percentage to insert into these areas. These expenses have a major impact on the cash on cash return. I'm worried that I may be running myself out of a good deal if I make these percentages too high but also concerned about being too low and having a major issue arise. 

I have put in 7 offers on different properties so far that have been "homerun" offers. I know the sweet spot is supposed to be 10-12% cash on cash return based on BP podcasts and talking with a few other investors. My biggest issue was the variable expenses. I was unsure of what would be accurate figures to punch in for vacancy, capex, repairs, and management. I will stay persistent. I'm working on an off market deal now. NOI is 35k. Purchase price is 360k on a 6 plex. Minimal rehab costs. Roof new 2014, all pretty new a/c units, only 1 furnace isn't newer. The cash on cash return is too low though. I'll keep on the search. I'll be attending my first real estate club meet up this week.

 My goal and plan is to find a deal that is smokin hot, red hot and find out if being a landlord is something I want to do long term. Once I get through a few months I will have a good idea of what I like and don’t like. Depending on the performance of the property with rent, tenants, vacancy and additional rehab costs I will determine if I will keep the property long term or turn to sell. 1031 exchanges really intrigue me so my plan is to utilize them when it makes sense. 

I am unsure if a 20 or 30 year mortgage would fit my goal better. I have been looking into all the financing options I have available to me. Trying to understand the pros and cons of each. What would you suggest? 

Our family business does flooring, cabinets and paint so we have pretty accurate numbers down. The HVac needs replaced so that virtually took us out of the deal. 

I have in the past wondered the same thing. My reason for getting into multifamily real estate is for cash flow. I used the full asking price as my purchase price. We put in 2 offers which were much lower than the asking price before ever seeing the units. However, after walking through all 4 units we realized the rehab costs would be too high. This 4 plex needed a new hvac system and roughly 10K minimum in repairs per unit. The seller was not wanting to come down much from her 175K so we decided to walk from the deal. 

I can agree with the fact that all those other states have much more to offer, however, I think we will have a large supply of housing available for much less cost. Illinois is a tough market no doubt. We will have to see what happens over the next few years. Thank you all very much for the responses. My biggest concern coming in was the percentages to use for variable landlord expenses. I didn’t want to shoot too high or too low so I wanted to get some insight on the figures you all use. 

Illinois has high taxes and a history of corrupt politicians with no signs of it getting better. I tend to agree with the rust belt. I think we will see the single family home values lower over the next few years and multifamily properties either maintain or increase in value because they are high in demand. Does the possibility of medical marijuana (in 2020) give us hope at all for our economy to recoup? 

Thank you Daniel and Aaron for the insightful responses. I have been analyzing properties like crazy and talking with investors and real estate agents about our market. Illinois has had 40K working age people leave the state. What do you think will happen to the values of single and multi family properties?  

 With P&I, taxes, utilities, insurance, rehab costs and roughly 30-35% (10 vacancy,10 management,10 capex and 2-5 for repairs) variable expenses. Are you guys finding a 10-12% cash on cash return? 

Yes sir the property will be self managed. I struggle with the percentage to use for Capex and Vacancy. Those two numbers change the overall cash on cash return by quite a bit. Making a possibly good investment become a bad investment. I want to understand and be as accurate as possible. Electric water gas will be covered by the tenant. The HVac needs to be redone in the whole building. I am a new investor but wanting to fully understand every aspect of being a landlord and analyzing properties.