All Forum Posts by: Craig Herring

Hi all! So I'm looking at a triplex that cash flows but isn't a great deal and just under my requirements for ROI. BUT it does have a large attic (1800 sq ft) above the property that was an old dance hall in the early 1900's, unfortunately the township won't allow it to be turned into a fourth unit, according to the sellers.

So I'm reaching out to BP to see if any one has any ideas to help increase the NOI.

I've thought about turning it into laundry but 2/3 units already have laundry, another idea is for storage but there is already a large garage on property that some of the tenants use.

Anyway thanks for any input in advance!

-Craig

Hi @Jamin Littell welcome to BP! I'm not in the wholesaling side of things but there is LOTS of great advice on getting started on the podcasts and blogs.

I'm local to you and sent you a message if you'd like to meet up sometime and chat.

Good luck!

Sorry to bring up a really old thread!

I'm hoping to join the next meet up.

I signed up on the Meetup page and saw that the last meet wasn't too long ago in Oct 2017 but was wondering if there are more planned?

Thanks!

@Adam Leese why are you looking at AA? As others have mentioned it can be viewed as overvalued and has a larger barrier to entry due to the high property values.

I'm also from Pinckney and am looking in Livingston county for MFH.

Let me know if you'd like to get together sometime.

@Ben Zimmerman Again, I appreciate your feedback about my numbers for my deal. I completely agree with you about the Cap Ex & repair costs not needing to change with rent changes, those costs should be fixed based on the type and age of the property.

My mortgage calculation does not include taxes and insurance, purely principle and interest.  I tried to upload my spreadsheet but for some reason I couldn't attach a file or send it to you in a message so here is a list of my numbers.

Income: 1575 (1750 - 10% vacancy)

Mortgage: 415 (80k 4.7% 30 yr)

Expenses: 1065 total

Taxes - 292 (3500 annual)

Insurance - 83 (1000 annual)

Prop Mngmt - 175 (10% of rent)

Cap Ex - 140 (8%)

Repairs - 140 (8%)

Water - 85 (900 annual)

Sewage - 100 (guess)

Garbage - 50

So besides the $280 in Cap Ex & repair, where do you see an issue?

@Robert S. those are some great tips, thanks!

Thanks everyone for all of the feedback and comments, much appreciated!

This property was on the MLS and actually has been listed for over 1 year, I know there was at least 2 offers that the seller accepted but they eventually fell through at inspection. And since the current asking price has not been reduced for over a year, I know that the asking price is too high for the amount of work necessary.

@Chris Seveney and @Ben Zimmerman the expenses came out to $1065/mo that includes 10% vacancy, Prop taxes, Insurance, 10% Prop management, 8% Cap Ex, 8% Repairs, Water, sewage, garbage (Electric is metered to the units individually). So with a mortgage at $80k that left only $95. When increasing rents $350 the reason the monthly profit only increases $319 is because of the percentages of vacancy, Prop mgmt., CapEx & repairs...these expenses are changed and not fixed. I am happy to send you guys my spreadsheet if you think I am making a mistake in my numbers.

@Ron Flatt This was my plan if I don't find another/better deal before then.  My thought was if the property is still on the market for another month or two to resubmit my offer.  I feel like since the property has been listed for over a year without a price reduction then they are clearly asking too much and should start to negotiate if they truly want to sell.

@JD Martin My offer was not a shotgun approach, it was more that I was finding asking prices that met my criteria and $100k just so happened to be close to my criteria but I was unaware of how $100k felt like I pulled the number out of thin air.  Thanks for your input though, I will definitely consider it on my next offer.

Thanks again everyone & happy new year!

Well I put in my first offer on a 3 unit MFH this past week and it was rejected...without a counter offer...and was told my offer insulted the seller!

Although I knew it was a low ball offer and didn't expect my first offer would be accepted, I was still pretty excited pursuing my first REI deal.

The numbers are below but here are 3 things that I think I can do to improve my chances next time:

1. Don't offer an even number - to show that there is reasoning to the offer (ie. $103k instead of $100k)

2. Explain my numbers to justify how I got to my offer.

3. Include a personal letter with the offer so that the deal is more personal instead of cold or robotic.

Do you guys/gals have any other ideas to help improve my offer success in the near future?  I'd love to hear your input.

Regardless, I will keep looking for deals and hopefully land something soon!

3 Unit MFH (1-1 bed, 2-2 bed)

Asking $184,900

Current rent $1750/mo (2 units were way under rent by ~$150 ea)

Pre-inspection Est repairs $20,000 (roof, very old termite damage, possibly exterior siding)

Conventional financing w/ 20% down.

My offer $100,000

At $100,000 with current rents = CF $95/mo  COCROI 2.7%

At $100,000 with $2100/mo rent = CF $319/mo COCROI 9.1%

Hi @Joshua B.  - sounds like an awesome deal that you found in AA, congrats!

I live in Pinckney and am looking for small MF in surrounding areas of AA (Brighton & Dexter) due to the slightly lower price points...what do you like about AA instead of something like Canton or Northville?

I hope this property turns out good for you!

@Joshua B.

@Lauren Reed welcome to BP! I am also a newbie in your area, I live in Pinckney which is just north of Ann Arbor. And the BRRR strategy is one of the ways I'd like to get started also.

My suggestion is to listen to the podcasts (show 200 is a great starter) and also attend some webinars to learn some of the basics.

I'd be happy to meet up sometime to talk about RE and the local markets.

Best of luck!