All Forum Posts by: Eddie Werner

My partner and I are making cash offers on duplexes. We have some of our own money and some investor money. Our strategy is to acquire properties at a 25% discount so we can refinance with a bank and get the 75% LTV back out as cash. This ensures we can pay back our investors. How do we go about feeling confidence the appraisal will be in line with our research and expectations?

Example: Purchase duplex for 50k cash when it is listed for 70k. Refinance and get 75% of the "appraised" value, hopefully around 70k. 75% of this is $52,500, which covers the cash we need to get out of it.

I am going to review this with some local appraisal companies to get their feedback. Has anyone had this same concern and how did you overcome it or feel comfortable with what you expected the property to apprasie for?

Hi Jerry. Water ($80 a month) is payed by the current owner. I am waiting to hear back if it is shared or separate. Thanks for the feedback.

Hi Sean. It is in Scott Township.

Aaron, the top unit will be vacant end of this month. Bottom unit is leased until early next year (it is rented for $430/month). Both units were under market rents by at least $100.

I am analyzing a duplex that could be my first investment property. After negotiating with the seller he would sell for 55k cash. The property was listed for 70k.

Current market rents for a 1/1 is between $550-$650 (I am using the low end to be conservative)

Revenue:

Rental Income: $1,100

Vacancy at 10%: -110.00

Net: $990

Expenses:

Taxes: $180

Insurance: $42

Property Management: $120

Maintenance/Repair: $100

Total: $442

NOI: $548

Mortgage: $378

CASH FLOW: $190

Additional Comments: PM will take first months rent when a new tenant is placed. I need the property to appraise for 70k so I can refinance and get my initial cash payment back out. The county website shows the full market value is $81,200. Will that have any bearing on the appraised value?

Comments are greatly appreciated.

Hi Rick,

I am going through this right now for a buy and hold property. The average bank will not lend 70% LTV. I have talked with countless banks in my area. I did find success with smaller regional banks and credit unions. Just Google search all the banks near you and stop by each one and explain to their business banking rep what you are looking for.

The "money down" you are putting is the 30% equity in the property built in to their 70% LTV calculation.

I am looking at a SFH currently rented for $425/month. Market rents in the area show $600 is where the rent should be. I asked the PM company why this was and they said the tenant has been there for a couple years and there are 43 steps from the street to the house. It is a good distance. Because of the sheer number of steps they feel it will be hard to find another tenant if the rent is raised and they leave. Have you ever encountered physical attributes of a property, ie number of steps that would make it hard to rent? Does anyone else have a crazy number of steps and manage to keep it rented?

What is your screening criteria? You must have that written down and follow it otherwise you can get into legal trouble. Whichever tenant provided you with the application first and passes your criteria gets it. There is no pick and choose. There are a lot of articles on this site about screening tenants. Read as many as you can. Best, Eddie

Does anyone strongly oppose purchasing a rental property during the winter months? I have heard it can be much harder to get a tenant once the holiday season starts and when the weather turns cold. I want to move forward but I am still researching fluctuations in seasonal rental demand. If you find a deal during the winter months would you still move on it?

Hi Lynn...Thank you for the response. I will see what I can negotiate with a couple companies I am talking to. I like the idea of a flat fee per year regardless of how many vacancies are filled.

Jon and Joel... Thank you both for your responses. My main focus is on cash flow. My job does require that I travel and I would like to spend more time with my family rather than maintaining the properties. I feel that as soon as I leave for a week long trip the world will end, which normally is the case no matter what.

Hi Kyle...I am researching this right now before I move forward with my first purchase. I have found (in Pittsburgh) the average monthly rate is 10% of the rent. Some PM companies charge an entire first months rent if they have to fill the unit. Others charge a maintenance fee as well. If you have more than one property you could negotiate a discounted rate. Make a spreadsheet comparing all your local PM companies. I will help you easily weed out ones that do not fit your model and you will have future contacts that could prove valuable in a time of need.