All Forum Posts by: Dave Hall

Hello Atlanta Investors and Brokers,

What's the current cap rate for apartment properties in Atlanta? 

Also, what ONLINE resources could you share which might shed light on:

• market rents
• market rehab costs

Before you say it, I am calling local brokers, CPMs, and others for this data. I just thought I'd ask here as well.

Thanks!

Thanks for the advice Tom. I did submit these risky offers to the owner and he laughed at the cash offer. I haven't heard back from him. I think Brian G. was right, the guy wasn't truly motivated.

On my next incoming call I'm not going to put any time into it unless I find strong motivation. 

• Columbus businesses added 12,900 personnel, expanding payrolls 1.3% since last June, trailing the 2.3% U.S. rise. The education and health services sector led job creation with 7,000 positions, a year-over-year upswing of 4.6%. The trade, transportation and utilities industry added 4,200 jobs, a 2.1% improvement since June 2014.

• Columbus unemployment was 4% in June, a decrease of 70 basis points from one year ago and 130 basis points lower than the 5.3% U.S. rate.

• Totaling 49,000 annualized transactions in June, existing single-family home sales accelerated 7.5% from a year ago. Velocity rebounded from the 4.5% decrease in the preceding 12 months. Despite the pick up in single-family sales, annualized permitting activity receded 8.5% year over year to 3,560 homes.

• Apartment demand improved 13% for first six months of 2015 compared to same period in the prior year. Renters occupied 2,640 apartments compared to 2,340 units absorbed in the first half of last year.

• Builders completed 680 apartment units metrowide during the second quarter, a year-over-year increase of 43%. The majority of new inventory was divided among the three submarkets of Hilliard, University/Downtown and Upper Arlington/North Columbus with a combined 500 units.

• With positive trends in employment and apartment demand, developers kept the planning pipeline full. So far this year, 1,800 multifamily permits were requested, a 9.8% annual upswing.

• Metrowide vacancy was 4% at the end of the second quarter, a tightening of 10 basis points compared to one year prior. Submarkets with the greatest year-over-year compression in vacancy rates were Pickaway County, decreasing 300 basis points to 2%, Southeast, descending 170 basis points to 3.1%, and Licking County, narrowing 150 basis points to 2.8%.

• The average asking rent advanced 2.2% annually to $828 per month in June. Rents were highest in the Bexley and University/Downtown submarkets, $1,109 and $1,100 per month, respectively. The Grove City area led rent growth, a 5.9% jump to $777 per month.

Hey Chris,

My all cash offer was based on ARV * .7 - repairs - profit.

The other two offers are simply based on giving the seller his price with terms that I would be willing to accept. 

As far as market value goes, I'm a bit confused because I thought ARV and market value were the same. Perhaps you could educate me a bit here.

Also what's the formula you used to get 67,000 out of 7,000 per month. Is that a cap rate? If so, did you include expenses? I understand cap rates for multifamily but I don't know how to adequately apply them to sfhs. 

Thanks!

Thanks Brian,

You're probably right about his motivation. He wouldn't say exactly what he wanted for the property so I'll go ahead and make him an offer just for practice and see what happens.

Since I don't want to take on the landlord job just yet, I don't think the installment sale is my preferred acquisition strategy. I suppose I could flip the cash flow over to a landlord for a fee.

Hello Everyone,

I am putting together an offer on a 3/2 sfh with 1508sf. The owner lives out of state and contacted me off of one of my yellow letter campaigns. The owner rented the house out to a family for $700 per month which is at least half of market value. It would easily rent for $1,500. He did this as charity but now, as he says, he is bringing his children and grandchildren into his investment business, he doesn't feel that the property is a good investment and I don't think he wants to be the one to raise the rents, so he called me.

Ideally, he would like me to keep the tenants in the house, although he knows I would have to raise the rent considerably. I drove by the house and it looks to be in good condition. It's 1963 construction and from the pictures I saw on Zillow, the interior is very dated and will need an update. I'm estimating around $20/sf for rehab costs. The lot is huge for the neighborhood (.33 acres) and has very nice landscaping.

DEAL SUMMARY

• ARV $253,000
• REHAB COSTS $26,500
• CURRENTLY OCCUPIED $700/MO RENT 
• OUT OF STATE OWNER
• OWNED FREE & CLEAR

The owner stated that he would like to get close to market value, which I can't do on an all cash offer, so I'd like to make him 3 offers to see how he'll respond. Please let me know if you think this is a good offer strategy and also let me know if you have better ideas. I'm still working on my first deal. Thanks! 

Here are my proposed offers:

• $140,325 ALL CASH (Exit strategy: Wholesale to cash buyer)
• $253,000 LEASE OPTION with $100 for the option and a 3 years lease of $1,000 per month. Convert the existing tenants into tenant/buyers or get new tenant/buyers. Get a lease option fee of $5,000 and a lease for $1,500 per month. Option the house to tenant buyers for $284,000 to be bought in 2 years. No rehab costs.
• $260,000 SELLER FINANCING, principal only assumable loan, amortized over 40 years, balloon in 5 years (the owner says he's 78 years old and wouldn't want to hold a note too long), 6 month moratorium on 1st payment. (Exit strategy: Landlord assumes the loan for a fee??? I'm not sure of the best exit strategy for this. Hopefully you can help. :)

I told the owner I would present my offer tomorrow.

I look forward to your analysis and advice. Thank you!

Dave

I went down to the courthouse and found out the latest probate case file numbers so I can do an online search using the case search feature on the website. Here's the LINK. I have to go sequentially through the case files to see what pops up. Then I can check to see what type of case it is, i.e., guardianship, trust, title-estate of, and more. I can then make a list of the case numbers I want to review at the courthouse which means a clerk has to sit with me in the room while I get the info I want.

Problem 1: Which types of cases am I looking for? As I understand it, I want to find out who the personal representative is for cases which have real property, but should I be searching trusts? 

Problem 2: What kinds of documents should I look for in the case file? I went down to the courthouse to look at a trust case file and all it talked about was the dissolution of the trust. I had a hard time figuring out whose name and address to write down so I could contact them. Also, in a lot of cases, the person I would be contacting is a surviving spouse, so I don't think I want to contact them.

What are you thoughts and suggestions?

Thanks,

Dave

Thanks Brian,

I just got off the phone and it looks like someone made him a better offer. I appreciate you and everyone else here taking the time.

Dave

Hello everyone,

Thanks for all of your advice on this deal. I'm waiting to hear back from the owner on my offers. Both Brian and Chase suggested a joint venture and that's the direction I'm planning to go in.

So to do this, do I need to create an LLC for the property and deed the house to the LLC or do I just need a JV Agreement or both? Does anyone have a good JV Agreement I could use for this?

What documents do you think I'll need to safely do the deal. I read in the Cat-Litter-House thread provided by Chris Vail about a "Release of Possession" for all of the stuff on and in the property. The owner has quite a bit including art, stuffed animals with cash inside them (he said his mother would stash cash in the stuffed animals and he wants to find these for himself, of course), bikes, large construction ladders, and other junk. I don't care about the stuffed animals, but I don't want to take a long time to sort through the junk just so he can find these things. I'm positive he doesn't want to deal with all of this stuff. He just wants the cash. How would you handle this?

Obviously I don't want to invest a dime in this property until I control it, so I would like to know what documents I should use to establish that control?

Here are the numbers as I see them now:

ARV - $190,000

Hard Money Loan for repairs only -  $60,000 ($50K Loan + points, interest, etc.)

2nd Mortgage to owner @ 20% of Hard Money Loan - $10,000 (skin in the game)

Housing the owner for 6 months - $6,000

Sale, Closing Costs, Holding Costs, Wiggle - $20,000

JV Fee - $10,000

$190000 - $60,000 - $10,000 (JV fee) - $6,000 - $20,000 = $94,000 (which includes his money for the second mortgage)

So instead of a $65,000 cash offer from the investor, the owner waits 4 to 6 months and gets $29,000 more. So even if the ARV is off by $20,000, which I doubt, he should still get at least $74,000.

My biggest concern is spending money on the cleanup just so I can inspect the house and find out that the deal is not doable because of some severe problem. Thoughts? Should I move forward or is this deal too risky for my first one?