All Forum Posts by: David Turner

Thanks everyone.

@Tom Lafferty Nobody really wanted to give me 80% but I played the banks against each other. First I had a local bank (Bank A) offer me 80% @ 5.5% which I wasn't really thrilled about especially because they wanted 15 year am. The bank I ended up using (Bank B) I was hooked up with through a mortgage broker. The mortgage broker said that 80% wasn't doable and I told him that I had this other bank offering it. He then said he would see what he could do and ended up coming back with this bank.

At first Bank B offered 4.75% with a 25 year am. The Bank A came back and offered to match and their loan fee was 1% whereas Bank B was 1% to the bank and 1% to the broker. I told the broker I was going to go with Bank A and he said they would beat their offer. He came back with 4.625% along with .75% for the bank and .75% for himself for a total of 1.5% in fees. In the meantime the Bank A went and took a look at the property. They are a Denton County bank and prefer to lend in Denton County so that coupled with the deferred maintenance they decided it wasn't for them. So I ended up going with Bank B.

They also had some additional stipulations. They require that the operating account is with them. They are also requiring taxes to be escrowed with them, but it is not a traditional escrow, it is just a savings account that we have control over, but we are supposed to ask for permission before we draw from the account. The $50k in seller concessions also has to be escrowed with them. They also require the mortgage payment to be auto drafted.

Hey everyone. Just wanted to share my success. It is a 32 unit apartment located in Dallas. It was built in 1983 and features 14 one bedrooms and 18 two bedrooms. The kicker about this property is that each apartment has its own garage. They are single car garages, but they are really long so you could maybe squeeze two small cars in them.

The property has a lot of deferred maintenance that I will be addressing in the next few months. The roof and gutters are the big thing. There is also a french drain system that is completely clogged up that we will have to clean out. The previous owner had just put in a mix of laminate and vinyl wood flooring throughout the units. The interiors are in pretty good shape, but the exterior is extremely neglected. The units have individual HVAC's and water heaters, about half of which were replaced within the last 2 years. The property management company I hired specializes in the value play. They have their own construction division to do all the work. They are a bit more expensive then the other companies I spoke to, but with all the deferred maintenance I feel it needs the extra attention these guys will give it. This includes a full time manager and part time maintenance person. Management cost will be about 10% plus one apartment.

It is in a section of Dallas called Vickery Meadows. It is a low income, mostly Hispanic area. It has the highest population density in the DFW area with approx. 44 units per acre. The area is in the beginning stages of gentrification with a new Walmart, Sams Club and Target having just opened up nearby. There have also been a few apartment complex's that have recently been torn down in order to build newer nicer complex's.

The purchase price was $850k with $50k seller credit to go toward the deferred maintenance so effectively a $25k per door purchase before figuring in deferred maintenance costs. I was able to get a local bank to finance it with a 80% LTV @ 4.625%. 25 year amortization. It is a 5 year note with a balloon at the end, but the bank has an option to extend for additional 5 year periods instead of re-financing. I wanted a longer term, but banks didn't want to go any longer without a steep rise in rates or larger down payment. Closing costs were $22,269.72 along with $2,100 for an inspection. Total cash in was $183k. Expected NOI (per property managers budget) $82,518.

I'm real excited about his deal. It is my first. I have a few other properties, but those are all partnerships that I inherited. This is the first one I have done on my own and will have control over. It is also my first multifamily, the others are industrial.

Here in DFW C properties are trading around 8-9%. Closer to 8% really.

I wouldn't worry to much about it. Yeah it is a hassle to find a new tenant, but think of all the headaches this will solve in the future. If after 2 months he is giving you proplems than realize that this is only the beginning if he stays there.

@Matthew Hicks there is only one place you can look at to see what should be your property managers responsibilities and that is your contract. Everything is negotiable. You also have to understand that as the customer you have all the power. You can fire him which gives you an upper hand in all negotiations. He needs you more than you need him.

$5k a year is ridiculous unless your using it to buy multiple $1mm properties a year. I even think what Loopnet charges is ridiculous but I begrudgingly pay it. I would rather evaluate any deal myself rather than rely on what some expensive service thinks is a good deal.

I would almost say that Costar has a incentive to "find" you good deals so that you will keep paying. The more good deals they show you the more you will feel the high price is worth it, at least in the short term.

The two best I have read are

The Complete Guide to Buying and Selling Apartment by Steve Berges

Mutli-Family Millions by David Lindahl

If a broken camera was a liability issue then they wouldn't sell dummy camera's.

There are no privacy issues as long as they are installed in public places. Don't install them in the bathroom, but outside is fair game.

With the numbers you have posted this is a bad deal. First I don't believe the expenses. They are way to low even for a newly renovated building. Who pays utilities? How much are taxes? What about insurance? What about property management? Even if vacancy is almost zero, you have to budget for it.

I don't even think a bank will finance it even with that little of supposed expenses. Most lenders require at least 1.25 DSCR some require even more. $139,400 at 1.25 is $174,250. NOI is shy of about $6k.

I hate to be the bearer of bad news, but I would stay away from this unless you can get it a lot cheaper. As in closer to half that price.

Taylor Green you cannot look at cap rates as set in stone. Every market is different. Cap rates also fluctuate with the market. Right now here in Texas the market is on a major upswing. Cap rates are dropping. If you say that you will only buy a C class property at a 9 cap then there might be years that you will be priced out of the market. Thats why cap isn't necessarily the best metric for analyzing.

You have to look at ROI and Cash on Cash in order to take into account financing. These tell you the real return on the deal. A lower cap rate might still be a good deal if you're able to get a low interest rate. It all depends on your required return.

ROI does not include equity until you sell. That equity can fluctuate with the market. If it goes south again then you could loose all that equity, so why should you include it in your calculations. Until you cash out, equity is a fictional number.

You said that you were going after 4plex's because you don't want to compete with homeowners. You also have to understand that there are less 4plex's out there at a discount. That is because that people who buy them are in it for business. This leads to savior business people who are less emotional and less likely to be desperate to sell.