All Forum Posts by: Ken Fricke

Good evening BPers,

I have been doing real estate investing for around five years in my area, I have flipped a few sfr with a small amount of success and a large amount of learning, I currently own two sfr one I am renting out the second one I am fixing up and will be renting soon.  I never have been the type to study to much I like to jump in with both feet learn and repeat. Don't get me wrong I like to read and I have listen to all the podcast love to learn I just like to learn by doing as well.

Because the cap rates in my area are fairly low on multifamily units I stared to look outside my state namely Wyoming an oil town i do have some connections up there my cousin a contractor turned oil worker lives and works in the same town, we found a 16 unit property that consist of one 8 plex one bedroom and two four plex's two bedrooms.

A small regional bank owns the property and has tried to manage it the best it could over the last two years.  Calculating the vacancy rate of the property during the last two years was about 50% which was not typical for the area over the same time period the banker just hates being a property manager, the property is currently rented at a 20% vacancy which they are getting $500.00 for the one bedrooms and $850.00 for the two bed rooms 

One bedroom a month fully rented would be $4000.00

Two bedroom a month fully rented would be $6800.00

Total rent a month is                                       $10800.00

The property also comes with five building lots zoned commercial that can be converted into multifamily units.

The cost I used to calculate the cap-rate are as follows:

Management                                    12%

Maintenance                                      10%

Repair                                                  5%

Vacancy after talking PMC                 15%

Insurance yearly                               $5100.00

Taxes                                                $5100.00

The bank is asking $690000.00

currently we are negotiating with the bank on the price we have a counter at $599000.00

I believe they will go a little further so we offer $500000.00

There will be some renovation cost of around $30000.00

I have checked out the local economy and rental situation we interviewed two different PMC, three years ago they were renting for one bedroom $1000.00 and two bedroom $1500.00

Seems to me to be a good deal compared to what i am looking at in my market, I am just worried I am missing something since this is my first multifamily unit any comment or help would be greatly appreciated.

I don't post much so sorry if it does't flow that great or I left something out

Hey Welcome Taylor,

Bigger Pockets is a great place to learn.

I live in smithfield, I have been real estate investing for five years, i have learned a lot, and am driven to continue on the same path as you Passive income, if you are interested I would love to sit down with you and trade ideas and stories, of investing and such. I currently own two single family house witch I rent out and I am working on purchasing a multi family property .

Definitely take full advantage of this web site, there is so many helpful members.

Cache Valley however is very different then most places around the country as well as down the wasatch front so talking to local investors is priceless as well!  Good Luck

Ken Fricke

Sorry I meant to say one lot with two four plexes that are two bed room units

thanks

Location: Pinedale,Wyoming

Property: One lot with an 8 plex, one bed one bath units, currently renting for $500 

one lot with two plex's two bed two bath units, currently renting for $ 850

Property also comes with five lots zoned commercial, The county said they would rezone them multi family if we wanted.

Owner: bank owned small regional bank with two locations

Asking Price:  $690,000.00

The tenants pay there own utilities, the bank has owned the property for two years and has tried to manage the property themselves they have had an average vacancy rate of 50% I talked to two different property managers in the area they said they could have it rented at 10% vacancy at least that is their track record for that area.

The pros of the property and the deal in my view:

Great location located close to the oil fields yet has an excellent view of the new fork river.

Bank owned so I think I could get a great purchase price working with a small regional bank.

The possibility of leasing directly with the oil companies for multiple years.

The Cons the best that I can tell:

Gas prices and oil prices are down an the biggest driver of the economy is gas and oil some risk involved because of the economy.

Property has a bad reputation of being the ghetto of pinedale 

Property needs some work my estimate is around $50 thousand mostly on a retaining wall on the back side of the property.

Rent on the units is down from two years ago when the one bedrooms were renting for $1000.00 and the two bedrooms for $1500.00.

More general information:

I have around five years experiance part time in real estate investing, I have 20 plus years of experience in building, I have flipped four houses, I own two investment properties single family residents that I am currently renting out, I am ready I believe to make the jump into multi family housing, I would like to get any help or advise that members of bigger pockets may have so that I do not miss anything that may cost me a large amount of money.

The cost i have taken into considerations when figuring out the cap rate are as fallows

Vacancy 15%

Management 12%

Maintenance 10%

Repair 5%

Insurance $420 a month

Taxes $420 a month

I am relatively new to bigger pockets and real estate investing so any ideas and or recommendation would be appreciated.

Ken Fricke

Thank you Bob, I will do some research on the Dodd Frank rule, I have never heard of it.

Thank you for the information Lance, and William,  This is all going through my real estate agent. The buyer has 40k down the asking price is 220k,  on a 3 year balloon payment, I was wondering if i could get 245k out of the house. For the additional risk 

I am new to real estate investing, i have a property that someone is interested in they want me to owner finance the deal.  It seems like I would be taking on more risk then if i just sold it, can i ask for a higher price or a higher interest rate for the additional risk?

There must be a reason he would like me to owner finance the deal.

What do you guy think about owner financing?

Ken Fricke

Thank you both for your information. Do you know if the list can be pulled up on the MLS?

I have been trying to find out how to get a absent tee owners list in my area. On the MLS or at the county recorders office, no one know's how that I have talk to. Does anyone have any ideas?