All Forum Posts by: Frankie Baca

@Barri Griffiths Thanks for the quick response! I appreciate the breakdown. I need to remember how to break this down for future valuations. Look forward to meeting you at the local meetups.

@Benjamin Fredricks That is great advice. I'll definitely look into classifieds. I need to start making connections with property managers, etc. for help.  Thank you!

Update on the property. The property owner wanted me to give him a ballpark offer based on the rents and the fact that the properties are in "good condition". My offer number I came up with using the same template that Barri mentioned was $625,000 for all 14 units. This is taking into consideration vacancy, 50% rule, and what I'd be paying monthly for financing PMI. Using Barri's template, here's what I did.

14 total units : 12 @ 750 and 2 @ 850

750x12=9,000

850x2 = 1,700

9000 + 1700 =10,700 monthly rental income

10,700x12= 128,400

128,400x0.1(10%vacancy)=12,840

128,400-12,840=115,560

115,560x0.5(50%rule)=57,780

NOI-$57,780

Market cap for C class is about 6-6.5%

So let's be conservative and use 6%

Value is NOI/cap rate

So $57,780/0.06(6%cap)

$963,000 Valuation.

$57,780 / 12 months = $4,815 NOI/month

Based off this information, and the fact that I will need to traditional finance the deal, what would you offer if you were me? I was thinking that I'd like to cashflow $80 per door monthly minimum.  This would equal $1,120 cashflow monthly.  With this in mind, I'm looking at:

$4,814 - $1,120 = $3,694  available for financing.

30 yr mortgage 

20% down

5.5% interest 

$300/unit/yr insurance x 14 units = $4,200 annual insurance

$5300 annual taxes

I'd be able to safely offer $625,000

Seems super low.. What do yall recommend?  Valuation is $963,000 but I can only offer $625,000.  

Would it be better to throw out the 50% rule and use the actual expense history that the owner has and maybe add in a percentage for error? or use the 50% rule and lower my cashflow expectation.

Dropping cashflow to $50 per door would allow me to offer $725,000 with 20% down. 

I have a feeling that still won't be enough.  May just not be a deal that works for both parties.

Either way, I have a meeting set up with the owner and he's agreed to let me pick his brain a bit.  He owns other multifamilies that he may be willing to sell as well.  Deal or no deal, I think I'll be able to gain a lot of knowledge out of this one.  Funny thing is, it all started with a simple call on a "for rent" sign.

Thanks again for the help.

Hey all, 

I'm looking at two off market properties for sale in Henderson, right off of Lake Mead/Boulder area.  One is an 8 unit with all 2bed/1bath, currently renting for $750 per unit.  The other is a 6 unit that rents 4 units for $750 and 2 of the units being 3 bedroom and renting for $850 per unit.  I'm still working on getting some numbers from the owner but as of right now, what I have is that all units are rented out, tenants pay for power and the owner pays for water/gas/sewage/trash.  The owner hasn't specified what the properties are worth to him but he said that he's interested in selling both and to give him an offer.

Multifamilies are few and far between in Henderson so I'm having trouble finding comparisons therefore I need to do a little more homework on typical cap rates, rents, etc.  If anyone has first hand knowledge with Henderson's market feel free to chime in.  I'd also love to work with someone with more experience if there is anyone wanting to get involved.

I'm going to need to finance the deal, so based on the current information and current income ($10,700) , I'd like to start by offering about $750,000. If my numbers are correct, mortgage would be around $4,000 which leaves $6,700 and then 50% rule $5,350 leaves us with $1,350 cash flow which would be just under $100/door.  I already see room for improvement which could drive the rent up but I'd like to get other people's opinions on the deal. 

The other thing I'd love to do is figure out numbers that would work with seller financing that would avoid the bank and give us a lower down payment. 

Any input is appreciated.  Thank you!

Originally posted by @Paul Ballew:

I know there are different strategies you use when the market is up vs. when it's down, though I haven't been an investor in a down or a crashing market.  Here's what I'm thinking:

In a hot market:

• Shorter hold times
• Harder to find deals
• Higher rents/lower vacancies
• Need lower margins to get deals
• Rehab doesn't need to be as nice 

In a down market:

• Longer hold times
• Easier to find deals
• Lower rents/higher vacancies
• Can get higher margins
• Rehab needs to be nice to attract buyers

So I think while the market is going down (or after it has been going down for a while), I would want to start buying more so that you're not late in the game for the uptick.  More people get afraid to invest so it becomes more of a buyer's market.  Also I think it would be good to sell some of your rentals to prepare for the low rents and vacancies.

When it's going up your appreciation kicks in and you can reap the gains on your houses.  Refinancing should be easier to since the values are higher, so you can get some cash out to reinvest.

But I think that in both markets I would still be buying, but have different requirements.

Anyone agree or disagree?

Paul

 I am new as well and believe this to be true but am still eager to see what the more experienced fellas have to say. I'm ready to get into the game and don't want to start off all bad!

Originally posted by @Brendan Leake:

Read an interesting article this morning about the flipping market here in Las Vegas. I am just curious what everyone's thoughts are about the article and the Vegas market in general.

http://vegasinc.com/business/real-estate/2015/aug/...

 Brendan,

What I got from this article is that there is just more competition.  It's all about standing out and being the best!  It may not be as easy as it used to be but if your strategy stands out and you're persistent, I believe you can still be successful here. At least, this is how I'm going to look at it. I'm just getting started and I'm not going to let an article get me down.  This is just my two cents. Good Luck!

Originally posted by @Matt Mortensen:

Thanks @Robert Adams for the advice! Where can I get info on the local meetups?

 @Phillip Dwyer hosts a meetup on the 25th of this month. Look him up.  

Welcome to BP! 

@Greg F.

I guess I did miss that. I was thinking, is this guy serious? Haha. Thanks for clearing that up! I saw one property pop up on MLS yesterday that was for $104k but valued at $175k, so it is possible I guess, just much more unlikely like you said.

@Robert Adams

I can see why these type of deals, when posted on MLS, have tons of competition which ends up driving the purchase price up to market value anyways like you mentioned.

I am going to personally try and focus on the off market opportunities and will definitely keep you in mind if I find any killer deals.  

I will be at  Phillip Dwyer's meetup next Tuesday, hope to see some of you there!

Alaska 😁

@Eric Fernwood

Thank you so much for the in depth, AWESOME post on Las Vegas. I was born and raised here and am very happy to call Las Vegas my home.  You're post gives me more motivation to get my real estate investing adventure started.

John G. Great advice on finding professional contractors. I do agree that the bigger contractors are shopping at lumber yards etc. where they are getting the material at a lower cost than the guy at Home Depot. Since these contractors have a consistent enough business to have accounts with suppliers, they likely have a more balanced business and can take on projects as they come. This also means that they may be getting a better rate on material which in turn gives them a little ability to work on price. I believe that if you want quality work quick, you have to pay for it, exactly like you said. I do agree that it is a numbers game but time is money, and the longer a job takes, the longer it takes to get the return on investment and start working on the next project. Also, if Homie from the Depot is a one man or one crew business, he likely won't be able to scale if more jobs come his way. He is just going to make whatever is making HIM more money the priority, leaving a penny pinching investor on the back burner with little to no options. Another thing to keep in mind is that skilled contractors should be spending more time on the job as John mentioned and not at Home Depot each looking for materials they should already have after doing a good assessment on the job scope. I don't necessarily suggest paying top dollar for extremely high end work in a low end area, I just don't think it is smart to go out of our way to underpay. You generally always get what you pay for. You aren't just paying for the job to get done. You are paying for the contractor to be there when you need them, the contractor to answer your questions and keep you informed, you are paying for the quality, you are paying for the timeliness, etc. Thanks again and Good Luck John! Frankie

Originally posted by @Account Closed:

Greg, I'm sure there are exceptions to this which is why I mentioned that I haven't given up on the MLS. Vast majority of the properties that I get sent are already priced at what they're worth.

If you've worked in the Las Vegas area and know where I can find MLS listings with enough margin for a good profit, please fill me in.

I realize that one may come up here or there and I should jump on it when it does, but the point of my thread was to find out about vacant homes that haven't been listed yet.