All Forum Posts by: Robert Freeborn

I'm pretty sure in WA it is illegal to grow weed unless you are licensed and a certain distance away from certain institutions, such as a school. As the owner, you could be considered complicit if they violate that.  

The most said advice is the most sound: get a lawyer.

Megan, I live in Bellingham, and the city has the exact same ordinance, despite Western Washington University literally being in the middle of town. I don't know about St. Louis, but up here the ordinance is run off of complaint based enforcement. I haven't heard about an exception except in the case of actual apartment buildings.

This definitely makes buying here difficult, as I don't want to buy in on a situation where I know i'll be out of compliance. However, like you, unless the building is designed and built from the ground up for 3 students only, the numbers just don't work. Its a tricky situation, and one that I don't have a good answer to, unfortunately. 

Thank you everyone for your help, thoughts, and analysis. This is what makes this community so awesome.

@Brent Coombs Good thoughts Brent. I'm looking here because I live here. I'm one of those "screw the wisdom" guys looking to house hack a 4plex with a FHA loan. We might sell our condo to get the cash to for the downpayment, or may just save up some more and rent both, we're not 100% sure yet, and it depends on the property.

I'm primarily looking at the college rentals for my parents, who want another investment property. They don't want to go to a state neither of us are in though (they live in texas). Staying local allows me to manage the property.

My overall strategy is buy and hold for the cash flow. 

@James Wise I was actually looking at it as a college rental. Depending on the size of the rooms (and i'm not sure) and the occupancy, you could get 4-600 a bed in this market, depending on room occupancy. Maybe more. That is probably what they are doing to get rents that high, but I don't know the breakdown of how they have it.

Chris, you're right. I was doing a quick look on zillow and didn't realize it was selected as an option. 

@Christopher Phillips Great spreadsheet there, thank you. Yes, the utilities are paid by tenants, as far as I can see on the mls listing.  

So from what i'm seeing in your spread, and the comps (I listed a comp up above) it is highly overvalued. 

So this question is to everyone: what, if anything, would turn this into a good deal? Would lowering the listing price suffice? Or would you do more?

@Clayton Sneider I am, and i'm just starting out, as i referenced in the post. That said, the expenses add up to close to 50%, which is why I still use it.  But I'm new.

In your experience, what % do you tend to see on small multi-family units? 

@James Wise I thought multi-family units were supposed to be measured against their income. Or is that primarily for 4 unit+?  As for the comp, there are more expensive units, but those are generally right on the coast with a view. This property feels like a huge anomaly. 

The closest competition is a duplex a street over (actually closer to the ocean). One unit is a 5/2 the other is a 2/1. Asking price is 785k. 

@Christopher Phillips Could you explain why you think 700k or so? That number doesn't even bring the rent to the 1% rule. I know its a rule of thumb, but its a good one! A 700k valuation, and a down payment of 200k, would give you a cash flow of $358 a month. While that is MUCH better, is that enough cash flow for THAT much money down? 

Hi BP Fam! 

I have a mls drip feed from a great realtor in the WA state area. I got a email yesterday for a 3-plex in Bellingham Washington. I'm going to list out the details below. I will NOT include identifying details (you can pm me if you want them.). What I'd like help with is this: am I totally off base, or is this so overpriced its beyond ridiculous? Or am I just so green that I don't see the deal. Here's the info from the MLS:

Listing Remarks: INVESTOR ALERT: Excellent University Investment Property! Triplex with 1 large 6 Bedroom, 2 Bath Unit with new kitchen, Fir cabinets and Fir floors throughout. Bay views & window seats give this home old charm & character. Also 2 - 1 Bedroom, 1 Bath Units - Always Rented!!! Parking in rear for 5 cars. Shared Coin-op Laundry Room.

3512 SF.

Built 1904

Lot 6969 SF

Gross Adjusted Income: 70,860

Net Operating Income: 54,860

Water/Sewer/Garbage: 0

Total Expenses: 16000

Gross Rent Multiplier: 14%

Cap Rate 5.7%

Additional Monthly Income: 300

Unit 1: 6 beds, 2 bath. Rent: 3785

Unit 2: 1 bed, 1 bath. Rent: 900

Unit 3: 1 bed, 1 bath. Rent 920

Asking Price: $970,000

50% rule means 2802 for expenses. If we assume you finance it for 30 years at 4.2% with 250k down, your debt service is 3520. Add it the 50% rule and you're at 6322.5 in expenses per month, or -$720 cash flow a month. 

If you buy it all cash, you would cash flow, but I can't fathom why someone would pay cash for this property when they could use that to leverage a much, much larger multi that has much better cash flow.

So, back to my original question: Are the owners crazy?  Or am I crazy and just don't see the deal here?

I look forward to learning from your wisdom and insights.