All Forum Posts by: David Wright

If you don't have a list of buyers drooling to buy off-market and you're an agent, why can't you list the properties on MLS or loopnet or something? What about craigslist? Can you list them on BiggerPockets?

Have you thought about partnering with someone?

Is it because the total cash invested in the refi is zero?

When I look at the 50% rule, I always assumed it included the vacancy allowance, but I'm still learning like you.  So if your taxes and insurance are 5% each, and PM is 10%, vacancy is 5%, minor repairs could be 5%, and capex another 5%. Utilities could be 0 or could be sky high if they're all paid by the owner.  

You might also consider that the taxes could go up as soon as your purchase goes through. I looked at a property a month ago where taxes were 9%+ of assessed value, and they usually assess at 50% of purchase price; If your deal had the same situation, you'd be looking at over $40k just in taxes.  I think the deal I was looking at was unusual because it was in Detroit, but just be cautious.

In my neck of the woods, a class C is 8-12 cap, but I don't know Phoenix

This deal was in a different state, not Detroit. It was a working class neighborhood but not a war zone like some pockets in Detroit. And I was thinking it was more like 20k per unit when you look at what can be rented and what would be needed to get the others rent ready. But point taken.

So, I made a full price offer on an apartment complex last week and lost the deal.  Here are the details:

19 units, 11 need complete rehab (down to the studs). 7 units rented month to month at an average of 395/unit. 1 unit rent ready. All units 1 bed/1 bath. Asking price was 160k, I offered 160k with a contingency of 80% financing.  

Current expenses provided by seller:

• 3000 tax
• 3200 insurance
• 6900 utilities

I add in 3000 for repairs (5%) for current 8 units, 1644 for vacancy (5%), and 3288 property management for a grand total of 19729 operating expenses. NOI is $13151, which would be an 8.2 cap (this is a 12 cap neighborhood), and debt service would be 6400 with a 30 year am, 5% interest. If I did nothing but kept the current tenants and rents, I would cashflow 6755, which is about 16% CCR after I account for closing costs and reserves. Market rates are 550, so there would be a big upside to raising the rents, along with renting out the 8th unit. So, based on these numbers I offered full price.

And I lost the deal. I spoke with the agent about why, and she said there was a second offer for cash - a lower offer, but it was cash and cash is king. Additionally, I *think* my offer was suspect because I submitted a LOI instead of a PA, and I probably came across as a newbie on the phone, so they may have wondered if I would actually close.

Lessons learned.  Does anyone else have any insight on why I might have lost the deal?

I see MF deals frequently here in Detroit that list "quit claim deed only, no financing". To me, that sounds like they are probably hiding something that a bank wouldn't overlook, but a newbie like me would miss.  Am I reading too far into it?  I've walked a few of the properties and don't see anything crazy; they need rehab, but I'm expecting that and calculate it into my numbers.  Is there maybe a problem with the title? Another lien?

Also, why can't you raise the rents to market rates all at once? 

Can you amortize over 30 years? Can you get a better interest rate?  The taxes seem sky high, like the assessed value is $285k, too, which seems odd for Ann Arbor (I'm 45 minutes away).