All Forum Posts by: Carl Schmitt

Steve, sorry about that. I must have read right over it. Buying at a lower(true market value) price is even better, obviously. If these could be purchased at market value, they would produce some really nice returns.

Kris, that is very possible. I'm not in a financial position to purchase yet, so I didn't get that far to look at true rent rolls. Just using the numbers they provided(adjusted if I think they're off). Personally, if there was one tenant not paying rent, I'd factor it into my offer, but I wouldn't be too concerned. As long as they don't have a lease, that is. As far as I know, if they're a tenant at will, and the property transfers, the tenant doesn't have to. I'd prefer to find a tenant that I approve of vs a tenant that meets someone else's approval.

Steve, only 3 4-8 units have sold in the same town In the last year.
1. Six family complete gut for 45k

2. 4 family with all 2 bed units rented for 600. Separate utilities. Listed originally for 124k. Sold after 281 days for 85k. NOI using 50% is 14,400. So 17 cap.

3. 4 family reo completely vacant, (3) 2 bedrooms, (1) 1 bedroom. Should have rents of 2275, NOI 13650. Sold after 358 days for 61k. Doesn't say anything about condition, but assuming its in move in condition(probably not the case), cap would be 22.

I think I answered my own question. Compared to other deals posted on BP, the listed prices looked decent. But they are high compared to properties In the same area.

Ann, I was hoping you'd jump in, you might be the only person that knows the berkshires on BP. These two properties are in North Adams...I know what you're thinking. If the target tenant for these properties were people making 60 or 70 grand a year, I would agree completely because those jobs just don't exist in N.A. However, these are properties in "C" areas where 1 beds rent for 400-450 and 2 beds rent for 550-650. The berkshires really didn't boom in the mid 2000's and also didn't crash too hard either. No major companies have come or gone in the last 15-20 years. My point is, even someone making 10 or 12 dollars an hour will qualify for the 3x rent income method. What do you think?

Steve that's a great point. Ill search through the MLS and post a couple examples, just for conversation sake. That leads me to ask, if you were buying just for cash flow and you weren't concerned with future appreciation, does your purchase price compared to other sold comps matter so much? As long as it cash flows to your standards, that is.

Property 1 has 3 out of 4 rented. I have not been in the property to see what needs updating. According to the agent, it's cosmetic. I figured 5k a unit for updating to very basic finishes, painting ect. I could be way off, though, since I haven't been inside. I'm just starting out and really not even in the market to buy yet, more of a learning experience for me. I do know the area pretty well from running sales leads in my day job there. It wouldn't be my first choice but I wouldn't be scared to live there(before and after dark) by any means.

As far as buying at twice the price, that's why I posted. I have seen the deals people post and get "approval" from a lot of the veterans on BP that don't even come close to these numbers.

I know some people refuse to buy anything where the owner pays utilities, so that could be one reason. Massachusetts is also as tenant friendly as it gets, so that doesn't help either.

What are your thoughts on the second property. I looked at it 2 years ago when it was listed by owner. Now he has it with an agent. The property was the owners baby. 3 of the tenants are section 8 and 3 of 6 units are deleaded. He's looking to retire. Personally, if I was in a position to do it, I'd jump all over it. Do you agree?

Nancy, there are 21 properties for sale that are between 4 and 8 units. There are 1258 properties for sale in my county.

I've been reading through the deal analysis board and feel like I've come half way decent at deciding if a property makes sense. What I can't figure out is why so many properties in my market aren't selling. One thing I know is that it's a small area (~60k people) with not too many people moving to or away from. The county also has its own MLS separate from the rest of the state which limits "outsiders" from seeing what's going on. Here's a few properties for sale that have all been on the market 150+ days.

1. Property needs updating, all cosmetics. Landlord pays heat, tenants pay electric. It's a 4 family with all 2 beds that rent for 600. Taxes are 1412 a year. They're asking 59,900. Even if you go to 55% expenses due to the utilities being included, NOI of 12,960. At a 15 cap, you're at 86,400 less upfront expenses. Even if it takes 20k to update it, you're at 66,400 and they're asking 59.

2. I have been in this property before and the owner has taken very good care of it. It's a 6 family with gross rents of 4120. Tenants pay all utilities and taxes are 1833. 50% rule says NOI is 24,720. At the same 15 cap, you're at 164,800. He's asking 139k.

The town these two are in is not the greatest. Certainly not war zones, just low income areas. You would never buy in this town based on appreciation. Average property in my market sells at 86% of list.

So my question, why are these properties just sitting? Am I missing something?

Even when paying for a car in cash, you still have a payment to your savings account each month. The money isn't just going to appear. A 15k car over 5 years at 3% is 269. If you saved up over the same 5 years to pay cash, you'd need to put 250 in the account each month. I guess the question is, is the 19 dollar a month savings worth anything to you? Is 1140 bucks over the next 5 years going to make a difference to your future investments?

As far as paying for full coverage insurance, I can't imagine buying a 15k car without full coverage. You could pay it in full, drive it off the lot, and total it. Now you're out 15 grand. An extra 50 bucks a month is a fair price to pay for piece of mind if you ask me.

Wayne, I agree it definitely has to work for you. Cold calling isn't for everyone. For me, I hate the idea of sending something out and wondering if they got it, if their interested but afraid to call, ect. For me, I'm not worried about someone telling me no so I'd rather just get it done then wait and wonder.

I think it really depends on where you are on your path to your goals. Somebody like myself just starting out, it makes no sense to go buy a 40k car, cash or financed, because it only takes away from money I can invest. Some people on here that own 300-400 units, can take a $600 payment and it doesn't make a difference. My question would be, at what point do you have enough? Sure you could squeeze your family into a 2 bedroom apartment in a scary part of town to keep rent down, drive a car with 200k miles, and eat peanut butter and jellys at home every night. But for what? Having reserves is important, not being over leveraged is as well. But I don't see the point of being the richest guy in the graveyard. If your goal is 20k a month in passive income, once you hit that point, why would you not reward yourself?
Just my 2 cents