All Forum Posts by: Glenn Hanzelin

Jon,

So with the change I showed you it pushed the cap to around 10%. What should deals with clean up detail like this be offering? By the way, appealing the taxes I can get the tax bill down to only $11,000 a $5,000 savings. There are a few other things to cut expenses. In messing with some of these cuts I pushed the cap rate from 10.5% to around 13%.

Down payment: $106,650
Rehab: $35,000
Closing costs: $7,900
Bleeding: $16,290
Total cash invested: $165,840

The down payment of 20% of $360,000 is $72,000

Then I added $35,000 for improvements starting asap after close.

Total Invested $107,000

Closing cost $7,900
Bleeding $16,290

Total cash invested: $131,190


My spreadsheet tries does have the $7,900 or bleeding. But this might be more accurate. I appreciate this sooo much.

By the way, I think I can salvage eight decent tenants so I am out three months on eight units most likely.

The biggest Commercial Realtor in town told me 10 caps around in this area are common for nice stuff. I wouldn't consider this nice stuff though. 17 founded Police calls in the last month has caused this current owner to be fined $500 for excessive Police calls. The current owners is taking people from the homeless shelter and putting them in the building with county welfare vouchers all utilities included at $450. I am pretty good at screening but if the place isn't respectable, I won't be successful. Like I said, I think $35,000 will make a decent dent, but I will probably end up with another twenty in it over the next five years. Lets just run with the $35,000 assumption. I still can't figure out why my cap is so low.

Also, yes 1 bedrooms I have been told do flip over more in this town. We do have two small colleges that I could market this building toward. But it needs to be "CLEANED OUT" prior to getting those kind of clients.

By the way, I have a secret weapon that I use at my only Apt building I own. The secret is FREE CABLE. Unbelievable how devoted they are in my eight unit with giving free cable. Free cable costs me $25 per unit only in bulk. Also the 8 unit I own I bought out of foreclosure, I paid $72,000 for it, generates $3,000 a month income and has fixed expenses of $1,300. I got such a great deal that I don't even use my current building as a perspective. I was in the right place at the right time on that one.

So I really am a novice on Apt bldg's.

Thank you, thank you, thank you John for replying.

All these calculations where done on a excel spread sheet and I had a hard time conveying the data.

These are all one bedrooms, this building is in Davenport Iowa, couple of crummy buildings around it. I wouldn't consider it a great area, but it isn't the worse in the city either. This guy has had this place for sale for 5 years and originally had it listed in the beginning at $525,000 in 2005.

I consider myself somewhat savy with real estate, but my knowledge really is from owning a few duplexes. We own several duplexes. The apt bldg thing I have no feel for what 1 br per unit are going for. There isn't alot of them for sale out here.

I am looking to purchase a 16 Unit Apt Bldg. at a price of $360,000. The property is decent condition but has the usual BS deferred maintence from the owner not keeping it up to date and making improvements. I estimate these Improvements needed at $35,000. Probably about $20,000 light, but I am willing to take this risk. Things that are needed are HVAC upgrades, and a few cracked heat exchangers (not leaking CO2 yet) Carpets are trashed in 12 of the units, roaches, empty 40's, two pit bulls that need to go. Parking lot tilted toward building, place just needs some good loving.


INCOME

16 units @ $410 per month = $6,560
Laundry per month $250

Monthly Gross Income $6,810

Less Vacancy (estimate) 5% $328

Monthly Net Income $6,482


YEARLY INCOME $76,779




EXPENSES
Taxes 2009/10 $17,068
Insurance 2,604
Maintenance 3,887
Garbage 1,181
Water/Sewer 0
Gas/Electric 4,771
Snow removal/Lawn care 440
Management fee (5% estimate) 3,839
TOTAL $33,790
Expenses are as a percentage 44%

Net Yearly Income (before capital reserves) $42,989

Capital Reserve--4% (estimate) $3,071

NET YEARLY INCOME $39,918

288,350 Amount of New Mortgage

CASH DOWN 27%

106,650
6.50% Interest Rate 0.54%
240 Month's amortized

CAP RATE 11%



$2,149.86 Monthly Payment

Debt Coverage Ratio 1.55

$25,798.32 Yearly Mortgage Payments

Cash on Cash Return 13.2%

Yearly Cash Flow $14,120
Yearly Loan Reduction Year 1 $7,354
Total Benefit Year 1 $21,474



TOTAL RETURN 20%