All Forum Posts by: David Besins

First thank you all for the comments.

I have owned a few 2-3 families in the north east and the numbers are pretty close to actuals (3-4 years of actual expenses).

All of the se properties are in lower income neighborhood (that may make a difference).

I cannot see having 50% of gross rent expense + 10% vacancy, Or maybe for much nice/prime location. 

During the 30 day DD I would get confirmation on actual expenses, and get quote from my insurance broker and he always match or improve the rate of the property I buy-

So before committing to buying I would verify that most of the expenses are inline with budget.

I roughly end up at 28% expenses/gross rent (@ no vacancy) add 10% vacancy and end up around 31% including 5% management fee (arrangement I have with a local team).

Knowing most people using the 40-50% rule having 10% management fee that would put me at 36% in a low income area. 

Building is 1912 all brick 4 floor

rent per unit is between: 1000 and 1900 (1 and 2 bed)

30-35 units

Landlor pays heat-water - sewer / tenants pay electric

2 new boilers in 2016

Dont have the occupancy for the last 12 month but as of today it is 95%-full occupancy 

Thank you for the comments- I am still wondering how my numbers are so off. Most of the expenses listed can be verified and are true cost. 

We are only left with repairs and improvements, so this is the issue right?

improvement at 8K is a bit low but I don't think we can treat it as an expenses as it should improve building value.

What do you guys think are better numbers?

 Paul when you mention expenses at 40-50% of gross rent does that include vacancy? If so at what %?

Thank you 

Also I forgot to mention I also have 10% vacancy that is not part of the expenses listed so that would add 60k 

Do you guys have vacancy into what you call opex?

The expenses are in line with other smaller MA properties I owned-During Due diligence I will make sure all are accurate

Here is the breakdown:

RE taxes: 38K

Ins: 12K

Management 5%: 30K

water/sewer:19K

Gar/heat:12K

trash:6.5K

Common area electricity: 2.4K

alarm:1.9K

Snow removal: 3K

repair/maint: 26K ( I added 10K)

reserve replacement: 8K

Total 158K

Quick background: I have decided to start building a portfolio of rental properties (multi family) mostly in the Boston area for now. After acquiring a couple of 6 and 7 family - 600K properties, I realized it is quite a bit of work and decided my next purchase would be a larger project (easier to finance/manage etc).

My goal when I started looking for those was over 20% return (including principal payment) on a 20% down loan  while being very conservative with vacancy and budgeting repairs. I would probably exceed those targets.

Fastforward 3 month, we found a decent buy and here are the numbers:

List price: 6M (I know they will sell for 5.5)

Max purchase price: 5.25M

rent: $614K/year

expenses: 150K ( I am budgeting 160K)

For this deal I am trying to get to 10% DP / 80% bank (5year/25 year amortization / 4.875%) / 10% owner (matching bank terms). Using these numbers I get:

CoC: 65K (12.4%)

Return: 163K (31.1%)

The building is close to Boston and a solid brick building.

Do you guys think it is a good investment? - Please give your opinion 

When my agent visited the place prior to making an offer he saw that obviously someone was living in the house. The borrower signed a document with the loan packet saying that this was an investment property and that they would not live in the house.

We are moving forward with the foreclosure, and the guy is starting to say he will take this to the press(???) he owes me around 7K so far with late payment etc.

I wonder if there is anything I can should do about them living in the house?

Thank you 

A quick update. The broker with whom I work on a few project referred me to the title agency that handled all of our closings that has a "foreclosure" department.

I have starte the paperwork, release etc.

The title agency employee mentioned that we would set the starting bid based on everything that is owed to me and that of course I was free to bid on the property. But I could not come up with an opening bid or a reserve... :(

On the other hand I received an up to date "due" from the payment servicing company and the late fees and default interest really added to a lot already (almost 7K VS a monthly PMT of just 2.4K) he only missed one pMT so far (coming on 2). But his unwillingness to work on a reasonble solution is what bothered me.

I can see how a realistic 95-100 days until foreclosure fees can end up adding to quite a bit.

We shall see, I hope the owner will start to realize it is best for everyone to sell me the property at a fair price.

Thank you guys.

Question: If it goes to auction can I set the reserve high ( or to whatever the house appraises at)  to make sure I end up with the house?