All Forum Posts by: Darren Budahn

Thanks for all the great suggestions and insight from everyone!

To answer a few of the last few questions that were posted:

1. Yes, my financing would be for a 30 year fixed at right around 4.25%.  I do have cash to do renovations if needed.  However, I have walked through the property and it doesn't need any major work that I can tell.  It is currently fully rented with 2 fairly long term tenants.

2.  I do need to check out if the building would be non-conforming or not.  My lender is requiring this.  Just like Steve mentioned, in the event that the structure is totally demolished, the bank wants to make sure it is possible to rebuild the structure.  

3. I don't have an exit strategy at this point.  While I probably should, I'm not close enough to making an offer at this point to have considered that.  Also, I'd probably looking at a long term buy and hold as I don't plan on leaving my current neighborhood, but it's definitely something to consider.  The duplex layout is 2 bed, 1 bath in both units which is very common for this area and I'm not too worried about being able to rent it out due its prime location.  The 1 bedroom cottage would be more difficult to rent (IMO). 

Thanks again.

Thanks for the reply Dawn.  I would definitely get the home inspection before closing and would certainly like a reference if you don't mind.  The home inspector I used 2 years ago for my home was very good and thorough, but he has recently retired.  

I also just wanted to mention that I listened to your podcast (from last year I believe) on bigger pockets a few days back and it was excellent. I'm glad you recovered quite well from that first deal where you got burned by a family member.  I'm in the stage of trying to learn as much as possible and I figured I had to listen to your podcast when I saw you were Milwaukee area investor. 

I was quite impressed with your investment strategy. It seems like you are getting a great ROI on all your properties. In fact, after watching your podcast, I scoured the local homes listed on MLS for between $20k and $30k. I never knew you could get such strong rents for SFR's for homes at that price point. It looks like you are easily beating the 2% rule. It made me think that I may want to explore this option as well at some point. Being a complete newbie, I wanted to be conservative as I start out in REI by looking mainly at strong positive cash flow versus speculating on appreciation.

One quick question if you don't mind: When you locate a home that peaks your interest, do you have the home inspected by a contractor or home inspector before you make an offer to give you an idea of what the rehab may be?  Obviously hiring a home inspector and not making an offer would get quite expensive if done often.  I know you can get the home inspected after an accepted offer and back out at that point if you want, but I was just curious how you approach this. Possibly you have a contractor that gives free quotes before you make an offer?   Thanks Dawn. 

Mohammed and Mark--Thanks much for the replies. I certainly appreciate it.  Although the numbers appear good at first glance, I definitely will need to dig a little deeper as far as comparing them to other properties and as far as finding specific numbers to compare in regards to maintenance.

One thing that does seem to surprise me is that the property has been listed for 80 days and is in arguably the "hottest" part of town real estate wise. SFR's in this neighborhood are getting offers within days of being listed. Obviously, the pool of people looking at Multi-Family's is much smaller, but it still seems odd that the property hasn't had much interest from what I can tell. I suppose I just need to trust the numbers that I run. And then run them again and again. I also need to find someone in my area who has experience investing in real estate--would definitely help.

I was looking at a 3 income property in Milwaukee, WI that is listed for $175,000.  It is a duplex and a cottage on the same lot.   The total monthly rent is $2,300 and it is fully rented--2 long term tenants.  I am not planning on living here.  The property is in a very good and popular area of town, although I'm not necessarily interested in buying it in order to speculate on appreciation.  I am interested in positive cash flow.  I actually went through the property last week and it looks in relatively good shape. The property is 3 blocks from my residence as well which is a bonus.

It seems as though the GRM and Cap Rate look good for the property, although I don't know how useful the GRM and Cap Rate are for a 3 income property. I also don't know specifically what a good GRM and Cap Rate are for my area, but it does seem to compare favorably to some others that I have run the numbers on. I have not yet gotten the repair/maintenance records for the past few years yet either which would obviously help me calculate the cap rate more accurately. I am fairly certain that vacancy would be low in this area, although I have enough reserves just in case.

I am planning on putting 25% down and also feel I could get the list price down a bit as it has been listed for 80 days without a price reduction.  The deal seems to pass the 50% rule.  Even if I paid full price at $175,000, my monthly principal and interest payment at 25% down would be $645.  50% of my monthly rent is $1,150.  Therefore, I'd have a hypothetical cash flow of $505 per month or $168 per unit.  

Any thoughts would be much appreciated as I am just starting and have much to learn.  Thanks.