All Forum Posts by: Gilbert Dominguez

Yes, this can work out well especially if you can find a lot in an area where the municipality will only require a permit for the foundation at the new location. I used to buy these allot before but I do not see them on the market as much any more. But a professional moving company may charge you something in the neighborhood of around $30K to move it. 

Frequently property owners will even give you the house free if you move it off of the lot. It could be a city department wanting to build a new library for example and they want to avoid the demo cost so they will offer the house free or at a very deep discount like maybe $2K to whoever show to have the wherewithall to move it and has a legal lot to move it onto. 

One more reason is that they may see the writing on the wall with regards to ever increasing property taxes. I see many properties around the county where properties independent of property taxes cash flow beautifully but the property tax sometimes is 100% or even more of the gross income causing the cash flow to go negative. Can you imagine paying $9K in property tax on a $150k home?

How might you feel if you saw a listing of a $67K house with rents at $950.00/mo. Hummm ! might get your attention at first until you see that the taxes on it are $7,500.00/yr. More and more what a property's tax is will be  the one determining factor whether I will buy it or not and sell it or not. 

I would price out each choice. Hydronic, electric base board heaters or a full HVAC unit for the upstairs unit. What is your current budget? I would also be thinking to the future when you might want to move into a different property and rent out your upstairs unit as well. When it comes to heating you can either choose basic heating or long term heating. 

@Marvin Briscoe,

I would suggest you forget all about the 80 year old building. If you have patience, willing to learn, and able to live without the income you may get from a rental property right now the 12 unit apartment building is the better choice. 1.46 % x 12 = 17.52%/2=8.76% cap rate.

The thing you have to make sure of is if the 12 units are all rented out now and if not what is the historical occupancy rate. If the building is mostly rented out now then it will give you a reliable amount of money to pay your mortgage and start to build up a cash reserve for possible maintenance issues. You will need enough upfront cash to purchase the property, pay your share of escrow fees and purchase insurance plus pay for property taxes. You will have to figure out how much cash upfront you need to determine your maximum allowable offer. You cannot be thinking that you will offer to buy it at full asking price of $300K with 20% down of $60,000.00 because all the transaction cost, plus property taxes and insurance will amount to more than your $60K. 

The red flag is already that is has been on the market for 866 days. That is certainly enough time for experienced investors to have had a look at that building. Why would experienced investors pass on this purchase for over 2 years?

Are you sure the units are rented or are you calculating based on them being rented in the future. Sounds almost as if the building has been abandoned all this time. Are you thinking to bring this building back to life? I will ask again are there people living in that building and are those rents real? I mean if the building is really only 20 years old seems to me it would or should be in relatively good shape. 

If for some reason you are able to buy and maintain the 12 unit building I would say that within 6 to 7 years you could refinance it and be able to keep going. I would not make a decision on it until you do a walk through and have it inspected and have a General Building Contractor with you at the walk through and have real estimates of needed repairs if any. Take your time with it but to me I would be considering the 12 unit building but would forget about the 80 year old building completely. With the money you have on hand I would be thinking of trying to pick up the 12 unit building for something around $240K.

I wish I could be there and over you more but since it is too far away from me I can only make suggestions based on the information you are able to give. 

I would suggest you look up the property taxes on the building, Review the historical rental income, vacancy rates not what you calculate but what has been historical and accurate, review maintenance records and contact an insurance company and get a quote from them. Also pass this by a title company or somehow try to figure out what might be your escrow fees. Also your loan will be simply be $300K or whatever it ends up being lets say $240K because it may have loan origination fees, points maybe but whatever your total loan might be and what you will net can sometimes be very different based on the cost of the loan. 

@Brian Gibbons,

That lesson comes in semester #2 for newbie wholesalers. :)

Ok, so you did good, got a deal done. However consider you took 20% off of a $30K deal from someone's grandmother, someone in their last stage in life. 

Nauh ! I do not think the young man was fully conscious. For some reason the word,

"common" is on the tip of my tongue.

Come on now, he is ready for lesson #2 and so should everyone else be. 

Yes you did good, congratulations !........................... Now step over here and have a look at it from this angle. Got it?

Now tell me how are you going to do it better next time?

When you have a building that offers substantive data then you can apply standard formulas that you can plug that data into. If not such as in this case you can sort of reverse engineer your figures. I might start by reviewing the existing leases to determine the tenant history. If the leases show they are aged and still have more time before expiration and I can determine what the rental rates are I may be able to come up with gross income as a figure. Then if you know enough about evaluating a building for mechanicals, electrical, and structural issues you may be able then to determine what deferred maintenance figure to use.  

You may be able to get close to what an offer might be and then depending on what you desire or need for yourself as far as a cap rate you can determine if the building can offer that potentially or in actuality. You said the building is presently cash flowing but you will want to establish how reliable that cash flow is. 

Buying a building without strong accounting records increases your risk. You will have to determine what  is your risk tolerance and do you know how to monetize that risk. 

You should understand what, " Market Rates" are and mean. If most landlords in and around your area are charging $X for similar units as you have and are including the utilities in the rents then that is what you should expect to charge including utilities to your tenants. However it's all up to you. You many want to make a separate charge for utilities whether you have separate metering or want to average out the rents and include the cost of utilities to be charges to your renters. You may find that your rents will be above market rates but if that is what you want to do and that is what works for you then so be it. 

Your renters or potential renters may raise this issue with you or they may not and just base their decision of whether or not to rent from you based on your quoted rental rates. 

Electrical and gas separate metering is not that expense to accomplish but usually you may find that paying of a separate water meter may be cost prohibitive but then again if you think it is worth the extra expense so that you can manage better your property then you can choose to have all separate metering installed and pay for it. 

I think some or many rehabbers are missing this aspect of deal analysis especially newbie. 

I read post where someone will say, " I did everything right. I got a HML, I verified the comps, I got quotes from contractors but now my house isn't selling and I do not understand why". They try everything, discounting the asking price, asking people what features they want the house to have but the house still will not sell even after what appeared to be successful showings. If what you buy is not near a school, not near transportation lines, not near a hospital, not near a park, not near stores ask yourself why would someone want to buy your house especially why would they want to make an offer on it right away. You have to establish that there exist a demand for your house.

When I pick a house for which there will be a demand you will get people driving by during your rehab and ask to buy the house or rent it if you will be renting it. Many times I have had a house sold even during the rehab phase. During the last 3 weeks of rehabbing I get potential and interested buyers  calling me almost on a daily basis. 

If you qualify for a personal loan then just get the loan but I would agree do not mention its for purchasing real estate. Use the money for whatever you want. 

First the transaction funds are not in escrow until the buyer's money is in escrow. The closing of A to B comes first then the closing form B to C comes next. Usually this is done on the same day and hopefully can be done back to back. 

First closing you are buying the property

Second closing you are selling the property.