All Forum Posts by: Fernando Morales

@Mason Hickman

Thank you Mason.

I should've thought about asking my attorney! Smh

@Wayne Brooks

Thank you Wayne! This is very helpful.

I am finding that these properties are currently operating as either a triplex or a quad, but an inspection being done as part of the financing would trigger a report where I (the buyer) would have to deal with the penalties.

I am looking to buy a triplex or quad.

I have come across some legal duplexes that have been converted to either a triplex or a quad.

What are the consequences that could happen if I purchase a "nonconforming" property?

What instances might trigger those consequences?

For example, would I need to turn it back to a duplex by opening up a wall? What might trigger that? Would it be during the inspection period or maybe if I needed to get some repairs done in the future?

Most duplex zoning in my area is for 2-4 units anyway. So, is one of the potential consequences that I would need to convert the legal description to conform? If so, what does that usually entail?

Thank you for your input!

Fernando

Hello All,

I am looking for an inexpensive property accounting software.  The main features that I would like from the software are:

1- Invoices for rent collection created and sent automatically

2- Ability to link the the software to bank and credit card accounts

3- Pricing

4- Renters can pay for rent online.

Please let me know what you are using and what you have and have not liked.

Thanks,

Fernando

@Jaysen Medhurst, the seller is open to seller financing.  I didn't realize that higher rates would be expected.  I'll have to negotiate the terms.

@Brian Garrett, yes, I need to figure out the expenses.  I like the 50% rule for now.  Thanks for your help!

@Cassie Montalvo, Thanks! 

Do you have a general guideline that you use when calculating insurance costs for your deals?  

Unfortunately, the Bigger Pockets calculator doesn't have anywhere to type in "EXPENSIVE AF" yet.  haha.

@Jaysen Medhurst, Thanks for your input!!!

I'll try to address each of your points:

• Closing costs will be 1.5X to 2X what you're figuring for a commercial property.
  • FM - What do you use as a basis for calculating the closing costs?  For example, % of purchase price?
• Your loan assumptions are very optimistic. You may get 5.5% for 20 years or 6% for 25. Expect either a balloon or rate reset at 5 or 10 years.
  • FM - This deal is taking seller financing into consideration.  So, financing will be part of the negotiation...maybe.
• Repairs and CapEx are very low. Figure ~15% combined. Sure, they may be lower in the short term after renovation, but over time it will all even out.
  • FM - Thanks!  I will adjust my calculations.
• Management will be closer to 10%. You won't get close to 5% until you have a much larger complex (100+) or a lot more properties.
  • FM - Thanks!
• Vacancy looks low to me, but this is super local.
• As mentioned by @Cassie Montalvo , talk to an insurance agent. $1k/month sounds very high to me.
  • FM - Thanks.  I will reach out to a few insurance agents to get a general rule of thumb for insurance.  I realize that I have to get more accurate number prior to making a deal, but I need to learn how to analyze a deal that will allow me to make an offer.
• How much do you think you can push the rents?
  • FM - I think rents can get to 4 units at $1,650 and 2 units at $1,500.  So, about $9,600.
• Any opportunity to value add? Coin-op laundry for example.
  • FM - Maybe some storage or a laundry.  I'm not sure.

I definitely need to learn more!  No questions about it. 

Hi Cassie,

Thanks for your response. 

Regarding the ARV, I am basing on rents of roughly $1,350 and a cap rate of 5.5%.

So:

$1,350 x 6 units x 12 months = $97,200 NOI / 5.5% cap rate = $1,767,272.

I don't have a good handle on expenses yet.  So, I brought down the "value" to an estimated $1,200,000.

Is this the approach that you would take to calculate the ARV of a multifamily 6-plex?  If not, what would you do?

Regarding the renovation costs, some work has already been done on some of the units.  I will have a better idea of what needs to be done once I take a look at the property this weekend.

The building is over 40 years old and was in the process of being renovated to deal with the 40 year re-certification.  I don't know how far along they got with those renovations.  I will have a better idea once I look at the property.  But, in reality I would hire an inspector to give me a better idea of what needs to be done.

What are you generally estimating as repair costs per unit?  How do you come up with that amount?

Regarding insurance, according to another bigger pockets posting a general guideline is 1.25 - 1.5% of purchase price.  I really don't know, so I just used that as a basis.  

This is the thread: https://www.biggerpockets.com/forums/432/topics/531645-insurance-costs-for-multi-family-how-to-predict-costs

What has been your experience in estimating Insurance costs?  What have you found works best for you?

Thanks!

Fernando

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hi all,

I am looking at a foreclosed 6-plex in Miami, FL.  I would love your input on the analysis.  

Main questions are:

Does my ARV seem reasonable?

What should I put for monthly insurance?

Thanks!