All Forum Posts by: David Hildebrandt

Thanks for the input @Vena Jones-Cox. I have a friend who purchased on Morrow Place 14 years ago based on the thinking this area was about to turn all the way back then. Here we are a decade and a half later, certainly not turned all the way around. Has there been any noticeable increase in ARV on your more recent flips, as compared to the past?

I like the idea of "flipping" the small complexes. Hold for five years, make the necessary improvements and up rents when possible the either cash out refi based on a new LTV or sell and move on. All the while with the security blanket of cash flow unlike a traditional single family flip lets say where the carrying costs are all on you. I think the rents could quickly rise to $600x4 for the 1 BRs. $995 penthouse and $895 first floor TOTAL $4290/mo or $51480 gross annual less $14708 operating expense is $36,772 NOI. At a 10 CAP is $367,720, but that represents MY exit number, can't come in at that number. But beyond that hoping the area becomes a much safer investment over the next 5 year or so and maybe i could rely on a lower cap during exit.

Can you explain the difference between Gross Rent Multiplier and Cap Rate? I seem to refer to one and most everyone else refers to the other, @Alex Brookbank

@Alex Brookbank Thing is I am trying using the selling agent, hoping it motivates them to put a deal together knowing they can scoop the commission. I am from this side of town, so I think I am more comfortable with that area. That being said it doesn't seem so safe of an investment as to command a 7.8% CAP. And perhaps I used the wrong term by saying value ad before, maybe I should have expressed it as taking on a fair bit of risk based on the surrounding area maybe just turning the corner. Several buildings in the area have been razed including the lot next door, the quarter acre additional that comes with this purchase, as well as 5 contiguous properties one block over.

@Alex Brookbank I come from the car business and just like every vehicle has a trade in value (that owners never agree with) I think every property has its value, this one included. I just want to be conscientious of the agents time and almost feel I owe them a warning that my offer would be well off of ask. To that end I spoke with him today. Moved the showing back a week to allow me some time to properly put a value on the property and the opportunity to cancel if it just doesn't seem to be a fit. 

Thanks for the feedback @Josh C. just took in Kobe's last game at the United Center a few weeks ago, what part of Chicago do you focus on?

Thanks for the replies @Account Closed and @Omar Ruiz. I will run with the GRM method for the time being. I guess my general question is if I am placing an offer based on being able to come in an add value, I am the one who should enjoy the benefits of the added value. That potential should not be "priced in" just because the seller know the opportunity is there but hasn't executed on it.

So I am ready to do my first deal. I am very intrigued by the BRRRR method. I have a partner with the cash necessary to fund a down payment. And have begun the process of analyzing properties through the BP calculator. I have taken the advice of @Brandon Turner and begun treating the process like a funnel. My goal is to analyze three properties by the end of March.The issue I have run into with these 5+ multi units is that the pro forma numbers only take you so far. The unit I am focusing in on now is 6 units, four floors with a 2/3 1700 sq ft first floor 4 1/1 800 sq ft on floors two and three and a 2/2 "penthouse" on floor four. I am not really seeking analysis assistance on the deal as I want to work through it myself but I will include some details below none the less. My question is, am I wasting the listing agents time going to see the place before I even know the ball park feasibility of the deal? Like what if my offer is tens of thousands below what they are asking, should I let them know that before I go see the building? Assuming I do go, what kind of questions should I be asking as I visit the place?

From the agent-provided Offering Memo

$410k ask 7.8% CAP 8.4 GRM
2/3 - 1728 ft -$695/mo
1/1 - 864 ft - $605
1/1 - 864 - $600
1/1 - 864 - $560
1/1 - 864 - $595
2/2 - 1728 - $1200 ( estimate by owner...this penthouse is currently owner occupied and not generating any rent, this is the top floor and while all units have hillside views of down town this one certainly is the best)

$4255 montly "potential" rents

$14,708 Operating Expenses
$32146 NOI

My problem with these numbers is the owners are estimating an addition $14,400 annually based on the unit they currently occupy being rented. Far and away the most expensive unit in the building and above the market rents which I believe to be $995.

Also this area does not deserve a 7.8% cap, the investment is not that secure. But a recent 7 million dollar project just completed around the corner including a 100+ stall parking garage and 225 seat performing arts theater and popular hipster restaurant represent at least some money coming back to the area. The image below is what makes the property period and why this area is experiencing any reinvestment. The five closet multis for sale (all within one mile) have caps based on ask of 10,10,11,12,9 and 9.5.

Is this thinking logical?

$32,146 project NOI - $14,400 unrealized rents = $17746 / .078 = $227,512

Any equity you could cash out of your current SFH? We have a few conventional lenders (i.e. Huntington Bank) in our area that will do a home equity line up to 100% LTV. At a rate that is a bit higher than a conventional mortgage but less than the 8 to 10 percent and 3 points @Brandon Battle is suggesting.

I was checking into that meet up. Seems like there is a lot of demand for tickets! Would almost feel bad taking a spot from someone, but really would enjoy the networking opportunity. Have you attended the meet up @Theo Hicks?

I am struggling most with where to find deals, funding won't be an issue, but where to get started locating investments. I figure properties listed on loopnet, realtor.com, Zillow etc have all been passed over for some reason. If they were good opportunities they would have sold by now.

Thanks for the tip @Tyler WeaverI pretty much knockout one BP podcast a day on the way to and from work, so I have heard some great interviews. I have heard reference to the BRRRR method, and funny you should mention it, there is a webinar coming up on 3/3/16 which I found here:

Things I have learned so far:

1. I don't know what I don't know

2. This place is bananas

3. There are a million ways to make money in real estate

4. I have yet to choose which way to focus on

5. The Bengals will never win the Super Bowl

My name is Dave and I am mostly looking for input on starting off a real estate career while working full time, and raising three kids. Maybe I can knock out two birds with one stone in this post...Can anyone babysit on Friday night?

Commercial properties excite me the most. I like the ability to purchase a property, fix it up, adjust rents and sell at an asking price based on the prevailing cap rate. All the while carrying costs (and hopefully a little cash flow) are covered by the tenants.

Are there regular meet ups in Cincinnati? Any westside Cincinnati investors our there?