All Forum Posts by: Carl Schmitt

141 days is the average in my market, says the MLS. I'm a little skeptical of this number only because I see the guys that have properties listed for 1000+ days. Those numbers certainly skew the true number. I'd say for properties that are priced realistically, it's between 75 and 90 days.

Kyle, with asbestos siding, you can simply side over it. Very few people actually tear off asbestos due to the cost. Same with lead paint. It is legal and much more cost effective to just encapsulate it with new siding. If your going to have to remove any rotten wood on window sills, soffit ect, make sure you use a lead safe renovator.

I'm not an expert by any means but I know most of the experienced people use the 50% rule and then a 10 cap to get a starting point.
My quick math would be gross of 35,040, NOI would be 17,520. That's assuming tenants pay all utilities. So at a 10 cap it would be worth $175,200. In my area, nothing really sells a a 10% cap rate. Most are 14-16% here in Ma so be sure to check.
As far as financing, I do know that 6 units will be commercial. I haven't heard of any commercial lender that offers a 30 year term. 25 max as far as I know.
What are they asking for the property?

I'd imagine windows aren't as important in Florida as they are here in Massachusetts. I agree with what most people said, that it needs to fit the neighborhood. In Mass, most people have vinyl siding because they don't want to paint. So to keep old wood windows that have to be painted, wouldn't fit what a lot of buyers are looking for. Are you doing anything else on the exterior or is it mostly an interior rehab?

I love the idea... I've thought about something like that before, but I don't think it would work in my market. A complete gut in the worst part of town still goes for about 30k. If you can purchase properties that cheap, I think it could go well. I feel like you can literally change an entire neighborhood this way. If you could slowly purchase and rehab several houses on a street, and put a decent tenant in place, it goes from a street you don't want to be on after dark, to a decent family neighborhood. Am I dreaming?

Thanks Ann, I will check into that. So you have a rough estimate about the true insurance cost? Yes the property is in Pittsfield. I love Great Barrington, lots of good restaurants. Certainly not finding these numbers in GB though, lol.
Also to clarify, I'm checking the property out tomorrow. Didn't want anyone to think I was going to use someone else's rehab estimate.

Thanks everyone for your input.
Here's another question.. Our plan is to rehab, rent, and obviously hold until it sells. Worst case, we would hold the property for 2 years. Does it make sense to put money away for major future expenses when the property is recently rehabbed and won't need major repair while we own it?
Joel, my partners sister works at a local credit union and is working on some programs for us, otherwise it will be cash. As far as the 6 months stable rent, that shouldn't be a problem because we don't have a problem taking the cash flow until it sells. When you say you advise your clients to stay away from properties like this, do you say don't purchase at all, or just not at "retail" pricing?
As far a rehab, the agent told me someone looking to purchase it came through and thought it needed 100k. I think people tend to exaggerate. Even if that number is accurate, my partner is actually my boss at my day job. He owns a home improvement company and gets wholesale pricing. Our contractor does all the work on my partners house, and charges 35/hour. I'm thinking even if the 100k is real, it would only be 65ish for us. The listing agent said he thinks the bank will take between 55 and 65 for the property. So worst case, were into it for 130, plus holding costs with rent potential of 3900.

That makes sense Andrew. If I understand correctly, higher cap rate = more cash flow. That's why people post exaggerated numbers on loopnet, to make the cap rate look better. So my question is, if the property makes sense at a 10% cap, wouldn't it be even better if it was truly a 14% cap? Keeping purchase price the same, of course.

Joel, good question. First, this is actually a property that needs work on the inside. I would be paying no where near 180, and the goal is to rehab, rent the six units, and sell as a "turn key" property. I'm looking to verify a conservative ARV.
From an end buyer point of view, there would be no work needed as we will be rehabbing it. I have no doubt it will rent for 650/unit.
I pulled the tax number directly from the MLS. I will double check, but depending on where your father in law lives, we could be talking two very different areas. I live in the western part of the state, about half an hour from Albany ny. The tax rate is 16.11/thousand.
My last question would be, why did you use 10% as a cap rate rather than a different figure?

I've run the numbers several times, changing different sections to see how it would affect the deal. I just want to get everyone's input on it. If it were you, would you buy it?
So here's the details.
6 unit building in a blue collar area. The street it's on, I would say, divides a not so nice part of town from the best side of town. All 2 bed, 1 bath apartments. Each unit will rent for 650 a month, tenant pays all utilities.
Purchase price = 180,000.
Gross monthly- 3900, 46,800/yr
Taxes= 4263/yr
Insurance~ 1500/yr
I figured 15% for PM so 7020/yr
Another 5% vacancy = 2340
10% maintenance= 4680
NOI= 26,991
Putting 20% down, the balance over 20 years at 6.5% is 1073.63/ month. Using these numbers, I came up with 1169 a month and 14031 a year cash flow, after mortgage. Any numbers you see wrong, please correct. What is your opinion on this deal?