All Forum Posts by: Brian Morgan

It doesn't look very good to me for a few reasons.

First, based soley on your numbers, The cap rate is just shy of 8%. I would like to see a minimum a 10% cap on a multi like this. Which would bring the purchase price to 278,100

However, since your location is Dearborn, I am assuming this property is in greater Detroit? If that's the case, with the added risk of that market, I'd be looking for a cap with a minimum of 14-15%

Quite frankly, if this deal is in Detroit, I think you can do a lot better for the amount of cash you'd be putting in.

Best of Luck!

I wouldn't, not if you are fixing the issue within a timely manner.

Every states laws are different, so be sure and check your states specifics

I would sell it off. This property sounds like a lemon. Instead of paying the note off, use the 100K as a downpayment on a larger rental propery that cashflows properly. I bet you would get a lot better ROI.

Scott made some good points about the unknowns, but I'll give it a shot.

I came up with an ARV of $85K based on the house on the same street that sold for 84k, and the currently listed house on the same street for $85K.

Based on that, I would go 60K - Repairs. Which on the surface didn't look like a lot...

Interesting to note that the listing changed yesterday. The ask price went from 68K to 76.5K. Also this property has changed hands and listings since Oct' 2010 which is a red flag to me that something else could be wrong with the property.

Best of Luck finding your deal!

No disrespect intended, but my immediate first reaction to the signs is that they look hand done.

If I were a distressed seller, I would be looking looking for an experienced professional to come in and solve my unique problem.

In this case, the hand made sign portrays to me that you may not be able to come through on the deal. I'm thinking, if they can't afford a sign, then how will they ever be able to purchase my 200K home, close quickly, with no issues.

Others may have a different reaction. Maybe I am reading into the perception of it too much?

Best of Luck!

Hey Charlie,

Welcome to BP!

It looks like you are in good shape to jump back in. Since you will own your property outright, have you considered a HELOC instead of saving up your mortgage payment month to month? It might allow you to take down a couple properties to start off with?

Regarding positive cashflow, Will is right on with his post.

Best of Luck!

I'm currently looking at a Short Sale property with a failed Septic (title V in Massachusetts). I know the estimate may vary greatly, but can anyone ballpark the replacement cost? House is a 4 Bed, 2 Bath.

Also, what type of contingencies would you be putting in the offer?

I did just that with my first rental property.

I had little capital to start off with, so I decided to find a 4 family to rehab and live in. I used an FHA loan and was able to put 3% down instead of the normal 20%-25%. I also took a 203K rehab loan as part of the package to use for renovations.

Since I choose to renovate, it gave me rehab experience and an instant equity position. Becuase I lived in it, I also gained valuable landlord experience. To start, I managed everything myself for a cash flow boost.

It's been a few years now, and the property is still doing well for me. Just make sure you factor in all the costs and expenses before you buy. I could've really sunk myself if I didn't have a good grasp on the numbers.

I am going to give this one more shot because I think this goes beyond just this deal.

To answer your question. No, I do not bid $0 for the property, but I also don't give them the benefit of full vacancy for having done none of the work, as your numbers do.

That's exactly what the 50% rule is... A Magic Trick to make your cash flow disappear! This forum greatly exaggerates and promotes the 50% rule as some sort of Golden formula to value Multi unit property. I concede, that it is a good basic tool to get an idea of property value when there is absolutely no other information available.

However, In this case, We had two years of data! Are we supposed to just throw that out for the sake of using the 50% rule? There was $12,000 in utilities! There is no way to factor in that type of extreme number using the 50% rule.

Please, when seriously looking at multi property, take the extra step and do the math! It takes an extra 2 minutes and in this case would have been the difference between cash flow and an alligator.

Uwe, I'm not trying to bash. I an merely pointing out to you and other potential onlookers that you could potentially be giving away thousands of dollars!

In this case alone, using both our NOI's @ a standard 10% cap rate, we were over $130K apart on purchase value!