All Forum Posts by: Jeffrey Charter

Bandit signs in front of the property and at the end of the street with keywords like "Cash only", "TLC Needed", "AS-IS", "Handyman Special"..

At RE auctions pass out flyers of the property to bidder. If it is a deal they will buy, and then you can add them to your list.

Thanks Giovanni,

Since Iam still learning about MFs I doubted myself when challenged by a broker I'am working with. The current cap rate was around 7% @1.2mm, I mention I will not offer more than 875K and I only look at properties with a 10% cap. She said 10% cap was going to put the purchase price higher. I thought I had missed something when she told me that, but I knew I was correct. My question was specifically about the effect on prices from different cap rates.

Yes, like bonds. The higher the risk the greater the yield. Whereas the less risk and more stablility,the higher the price and smaller yield.

The higher the cap rate the lower the purchase price and value! Right?

Thanks

Asking Price: $52,000

Purchase Price: $41,000

Gross annual Rent: $21600

Insurance -$150

Sewer -$60

Taxes -$50

Trash -$60

Water -$50

Lawn/Snow Care -$50

Property Management -$180 ($1800 x 10%)

Capital Improvements -$180 ($1800 x 10%)

Repairs/Maintenance -$270 ($1800 x 15%)

Vacancy - $216 ($1800 x 12%)

Gross annual Expenses: $14592

NOI= $7008 ($1800 minus $1216)

Debt Service P&I: -$2640 annually (20yr term @ 5% with No down payment)

Cashflow= $4368 annual (NOI minus debt service)

Cap Rate= 17%

I agree with Bill about deferred maintenance.

Also

To many $4368 is a lot of cash, but you have to ask is it enough for my time and effort that I am going to put into this property. Some people say buy and hold is passive investing, it really isn't, and at that price point i'm sure you are going to run into a few unseen headaches.

If this were me, I would focus on bringing in more income. Maybe if I had enough to payoff the entire debt, I would consider it. But if I didn't have another 100 grand I would lose the purchasing power of that money.

Like Aaron said, you can put the money to work for you and get a greater return. Create enough income, and pay the debt off at a later time.

100k in school loans wow!!! Did you get a degree in Medicine?

Absolutely, I agree smokers and non-smokers don't mix. I lived in a townhome and my neighbor was a heavy smoker. The aroma would seep through to our unit. My wife was always bothered by the smell. Me, I had no problem. There would have to be a no smoking rule from here on out. Possible a designate smoking spot for the tenants that smoke.

Yea, it could be a problem. You would have to disclose to other potential tenants that want to move in, the aroma could carry over to their unit. Then if they have a problem with the smell they may want out, or stop paying rent.

pro:

You have paying tenants.

Cons:

Slippery slope. Property might get stigmatized and you could lose potential good future tenants.

The lease should have a clause in it about "illegal activities" Contact your attorney to find out the next step.

btw.... legalize it already

This is done all the time. Joint Ventures. Each partner brings something to the table.

Example: The equity partner owns vacant land and has the funds to develop the land, but doesn't have the construction or developement background.

The other partner has experience in development/construction, repositioning and dispositions.

50/50 might be to large of a risk as there is no incentive for the contractor to put foward his best effort.

If I had this opportunity I would set it up where I would get an preferred return of 8% and a 75/25 split.

Have the contractor also add funds into the project for materials and labors.

and having all the terms spelled out and agreed to before forming the partnership.

A suggestion on setting up the partnership payout.

http://www.ccim.com/cire-magazine/articles/splitting-profits

Is there a way to put it under contract? Im thinking wholesale or straight Option