All Forum Posts by: Chang Hee Lee

Hey Dave!

Hope this message finds you well, I know it's been awhile since you posted this. Despite everything going on in Illinois, there are still good deals to be found. As a realtor here in the Champaign-Urbana area, much of the investment property here is uplifted by the university and its large international student base which will only continue to grow, especially with the expansion of the medical program here. Therefore, good cash flow and ROI is possible.

Unfortunately, the budget issues, taxes, and etc. are pushing many individuals out of the state and there is a lack of buyers which is really putting a damper in the market here. However, I suspect many might take this as an opportunity to "buy the dip" in real estate here as one might say for stocks (I am also an equities investor/trader). The hardest part is investing with so much negative sentiment swirling around (and of course, nothing is guaranteed to get better) but that's what differentiates the good investors from the rest.

Associates in Business Administration & Bachelors in Finance...I guess they're kind of relevant? :P 

Hey BP!

Still relatively new to the forums but already so many stories to share, like this one...

A friend of mine recently bought a single family home and, in short, was a good deal, overall. However, a large branch (really large) of a tree in the backyard snapped off due to heavy winds and fell on the neighbor's roof causing structural damage. Apparently the tree had been rotting for quite some time, even before my friend purchased the property, and therefore the stability of the tree was compromised. The situation was a mess and Mother Nature taught an important lesson: Inspect the ENTIRE property. 

According to her, the inspection report came pretty clean with little problems in regards to the property building itself. However, no one made note of the trees (in fact, the neighbors were not even aware let alone the former property owner which helped keep legal issues at bay). And yes, I did intend on the plural because there is yet another tree in the backyard that cracked due to the wind and by the grace of God held it together (however, this tree is pointed at the other neighbor's house and needs to be dealt with immediately).

Of course, this is not the most evident concern that comes to mind when investors or home buyers have so much on their minds already but seriously take a look around. Money may not grow on trees but keeping this in mind might save you hundreds down the line...

@Michael Le I believe the total annual expenses do not include tax, tax is mentioned separately. With that said, I would think that the total annual expenses accounts for the utilities and also some of the other expenses you mentioned. That's the only way it would make sense I believe. 

@Jill F.@Cody L. Hey guys, sorry I should've included that info.

Hey BP,

So a friend of mine is looking at a $1.4 million 14-unit apartment complex and has convinced the owner into talks for owner financing. The owner is selling because their partner is leaving for California and it is simply too much given her obligations to family and etc. A common theme it seems. Anyways, he has come up with four different avenues and wanted a second opinion on them (This is his first owner financing proposal on an apartment complex). My experience with such large properties are limited so I thought I'd throw it out to BP..

Annual Net Operating Income = $102,560/year   

Taxes = $38,000/year (2015)

Listing Price = $1,400,000.00

Previous Purchase Price = $1,000,000 (4/29/2013)

1) Principal Paid at Later Date - $1,400,000.00 paid in 25 years

2) Principal Divided into Monthly Payments (No Interest, 30 Year-Term) - 

Estimated Payment (Including Taxes) = $7,055.56/month or $84,666.72/year

Profit (Before Rent Raises & Etc.) = $102,560 - $84,666.72 = $17,893.28

3) Interest-Only Payments & Balloon Mortgage (5-Year) -

Assuming 2.875% interest rate for 30 years and $1,200,000 purchase price

Estimated Payment (Including Taxes) = $6,041.67/month or $72,500/year

Profit (Before Rent Raises & Etc.) = $102,560 - $72,500 = $30,060.00

4) Principal & Interest Divided into Monthly Payments -

Assuming 1% interest rate and $1,200,000 purchase price

Estimated Payment (Including Taxes) = $7,026.34/month or $84,316.08/year

Profit (Before Rent Raises & Etc.) = $102,560 - $84,316.08 = $18,243.92

This is a lot but any feedback would be greatly appreciated. Also, hailing from Champaign, IL so if there's any state specifics in relation to these types of transactions (I'm more SFH), I thank you for any input you may have.

@Shawn Q. Thank you for your wordiness! Haha and always good to have a fellow investor in Champaign to talk to on here.

Looks like this conversation's wrapped up. Just thought I'd drop in and leave a good 'ol quote from the Oracle of Omaha himself...

“Our favorite holding period is forever.” :)

@Harold Henderson Hey Harold! I recently helped a relative of mine close on a rental with tenants already in place and like others have already mentioned was a great relief, especially since they have always paid rent on time. Unfortunately, they are quite messy and obviously not the ideal tenant she had in mind which has caused A LOT of headaches (Mice, broken pipes...).

It's definitely a hassle to find new individuals but for the long haul, I would say it's worth the effort to find good tenants that will let you sleep at night.

Hope this helps a little!