All Forum Posts by: David M.

That I don't know. I know that these units have a pretty high occupancy rate, but from what I've seen so far in the few properties I've checked out, RUBS is not implemented in this area (based on a very small sample size). I wouldn't be too concerned about it, but it's not the norm, or doesn't seem to be.

@Michael Johnson - RUBS is ratio utility billing system, or basically billing back the tenants for shared utilities, in this case, water and sewer which are roughly 300/month (total) on this property. 

@James C. - sorry the break even is including the expenses reported by the current owner.

Hello BP community,

Do you think this is worth pursuing? I understand the main goal is a "great deal," but for my first time out, I'm ok with an "ok" deal at the moment.

4 unit (2br/1ba each), market rents are 750-800, currently all are rented for about 640-650. Seller would be asking 280K. Using 8% vacancy, 8% repairs, 8% PM, there is no cash flow. Without PM, it would be ~200/month. (I do plan on self managing, but want to build PM in as well). Goal with this is long term buy and hold.

If I run the numbers with slightly under market rents, and institute RUBS, it ends up cash flowing about 525/month (including PM) which is about 9% CoC. (30 years @ 4.9 %, 25% down)

Those numbers are pretty good for this area from what I've been seeing. This owner though hasn't increased her rents, but is selling based on what market rents could be. Property is in above average condition with a lot of recent improvements including new roof, windows, an 3 of the 4 units fully rehabbed within the past 2 years. 2 of the 4 water heaters replaced last year.

Thoughts?

@Mark Fedorov - he responded to a letter I sent out to a small group of owners on this particular street. I would be interested in this unit for buy and hold. He said one of the four units needs a full rehab, but the others are in good shape. I get the impression he needs the money from the sale for something else as well, but that's just a hunch.

I'm not sure how to guide him to fully understand what he is looking for though, that's the problem. It doesn't sound like he's interested in a 1031, or isn't aware of it.

I guess I'm not sure where to go with this...he said he was going to talk to his CPA to see what his options are, so maybe I should just lay low until then, but I didn't want to miss out on something either.

Hello BP'ers,

I had someone call me regarding a 4 unit that he's interested in selling, but is concerned about taxes and recapture costs. Property was purchased in 1989 for 165k, current market value around 270k. Owner has an outstanding HELOC of 130k against the property.

Current rents are 750 for 3 of the units and either 550 or 575 for one of them. (All are 2BR, 1BA). The other three units are recently rehabbed with new windows/paint/carpet, but the 4th is not. Owner estimated 8K for a full rehab. The units in this area all get rented fairly quickly, and the numbers I ran conservatively cash flow about 400/month after everything's said and done. (And that's including PM fees)

I can/am qualified for conventional financing, but in this case, seller is more interested in spreading out his tax burden.

Can someone help me come up with an offer that would be beneficial to both of us, or, should I not bother due to the 130k outstanding heloc? He seems "slightly motivated" we'll call it...

Thanks all.

@Neil Goradia - I received another call the other day from a different owner on this same road. I'm hoping you might be able to offer a suggestion. The owner is concerned about the taxes and depreciation recapture he'll owe if he sells outright.

Purchased the property in 1989 for 165. Current value around 275K. He has a HELOC on the property with a 130K balance.

As I heard on a recent BP podcast (from way back when). I'm ok not hitting a home run my first at bat. I'm happy to hit a single, so if there's something you can think of that might work for both of us, please let me know.

BPers,

I received another call on a few mailers I sent out the other day regarding a 4 unit property near me. The gentleman is interested in selling, but he's concerned about the tax implications and that he'll owe a large chunk of money if he sells. The property is in good - above average condition, it's not a "motivated" seller, but more of a market rate deal which still cash flows decently.

Market is around 265-285. He said his neighbor offered him 300, but again, he's worried about taxes. Any suggestions on how we might come to some agreement are welcome. Please let me know if I can provide any additional info.

Hello BPers,

I received a call from a mailer I recently sent out about a 4 unit near me. The owner said he's looking to exit his properties over the next few years, but would consider a good offer on the one I inquired about.

I don't have enough capital to do the deal in cash, but could do it with a traditional mortgage, which I'm ok with, but I'm guessing the seller wouldn't be interested since he'd have to come out of pocket with some money as well.

I asked him if he would be interested in seller financing, and his initial reaction was no, but (being new) I didn't present it very well from what I've been reading.

Comps are in the range of 265-300k in that area for a 4 unit. Current rents total 2985/mo. with 2 units being about 75-100 under market.

Could you offer some suggestions on structuring this deal so it works for both of us? He's not motivated to sell quickly, but was "willing to entertain a good offer." Based on my estimates (8% vacancy, 10% repairs/capex, 8% PM) on 275K w/25% down, it cash flows about 400/month after expenses.

Any suggestions are appreciated.

@Kristopher Hanks - exactly. My outlook is that I want to replace my current income as much as possible, so that money (in the 401K) is doing nothing for me in attaining that goal.

@Mindy Jensen - agreed, especially over the past few days, with the market reaching new highs, the ____ has to hit the fan soon I would think.

@Patsy Waldron - thanks for the input. IIRC, I believe my plan allows me to keep paying on the loan normally if I separate, but yes, that's one thing to consider/check into further.

My thoughts are: I could wait another 1.5 - 2 years to save enough for what I'm looking to do, but if I can get that dollar amount now, I'd rather take action sooner than later.