All Forum Posts by: Heather R.

@James Wise Thank you for the feedback! Point well taken - I am new so spreadsheets give me a bit of insight into the realities of what a property brings in. But I can see what you are saying. My goal is to find cash flow so that I can roll that up into more properties. I could also produce return by riding appreciation and refinancing I suppose... but I am not confident enough to bank on that.... 

@Aaron Lee All the multifamily buildings in Tacoma are getting snatched up and attain 'hot home' status which is crazy. Yes - it definitely makes sense to price multifamily based on income... 1-4 units seems to draw competition from homeowners as well as investors, which I think drives up price too. I will be interested to see what this goes for! I went to see the unit a few hours after it posted online and they already had 2 offers in hand...

@Patrick Britton Good point about using percentage of gross rents as a way to estimate expenses... Do you know of a good resource to learn how to estimate these expenses based on... size/type of property/age?

I have been investigating Kansas City, Columbia OH, Indianapolis, and Cleveland. I have not looked into any on your list... I am still in the info gathering phase (talking to local PMs, online research, etc) and it is hard to decide where to focus my attention. Indianapolis seems to be reasonably priced with decent debt service to income ratios. It also is bringing in a lot of tech jobs. But so are a lot of other midwestern cities. I will look into those markets! Thank you!

@Matt Lefebvre Wow! Thank you! This is really helpful. I have been struggling with how to determine the price that should be offered on a property based on income. Do you not consider raising rents to market 'forced appreciation'? Or a 'value add'? Or are you saying that the offer itself should not be based on these projected numbers? Thanks!

@Account Closed Thank you for the feedback - is the $1500-1800/yr for insurance for all 6 fourplexes? And the 10% management fee would cover both management + leasing fees? Your answer highlights the need for me to ask a knowledgeable PM company or broker what the units would rent for... I went off craigslist, but should have used more sources. I will keep an eye on N. Everett - thank you!

@Ike Hobbs Thank you! Yes, it took me a while to come to that conclusion - it feels somehow riskier to go out of state, but if I stay here, all my money would go into a single property banking on appreciation, which is also risky.

@Nicole Hoss Thank you! Yes... prices out here are pretty crazy. I originally wanted to invest where I live, but it is just not reasonable. Thank you for the encouragement! 

@Antoine Martel - Thank you! Good to get some confirmation!

@Steve DellaPelle - Perfect - I will adjust that assumption and increase the insurance premium. Thanks!

@Daria B. - Thank you! Yeah - they are few and far between in the Seattle area, and usually when they do come on market they are terribly run down and need a lot of work. It's hard to find any that make sense out here.

Hello,

I am currently evaluating a few markets, Indianapolis and Tacoma WA to purchase a small multi-family in the next few months. I live in Seattle so Tacoma has been on my radar due to its proximity. Appreciation in the Tacoma market will likely outpace Indianapolis and the properties are much more expensive. In Tacoma, competition has skyrocketed and everything is going for asking price or above. 

I went to look at a fourplex yesterday in a good area, the building needs some work but nothing major I can see. I have been running the numbers and it just doesn't make any sense to buy based on them - am I missing something? Am I being too conservative? Or is this truly not a good deal?

Building - 4-plex

1-bedrooms, 750ft

Laundry in basement (not coin op)

Storage in basement

Parking

Asking price: $389950

25% down: $97487.50

Amount financed: $292,462.50

At 4.5% interest rate, mortgage payment would be: $1481/mo

Current rents: $650/unit

Based on market, could potentially move to $750-800/unit with some updating

Using $750 (to be optimistic) - $3000/mo in income

Property management @10%: $300

Leasing fees: 1 mos rent: $3000/yr or $250/mo (if all the units needed to be leased during a year @ 1 mos rent per)

Capex reserve @10%: $300/mo

Maintenance/repairs @5%: 150/mo

Vacancy @5%: $150/mo

Property taxes: $452.83/mo

Electricity (for basement, laundry): estimating $100/mo

WSG (currently landlords responsibility): $320/mo (estimated based on Tacoma's pricing)

Insurance: $70/mo

Total monthly expenses: $2092.83

$3000 (income) - $1481 (mortgage) - $2092.83 (expenses) = -572.83/mo

Am I being too conservative in my numbers? There are things that could be done to reduce some of the expenses/increase income, like putting coin-op in and implementing RUBS. But I am also not considering the updating that would need to be done to the building which would be thousands.... I don't think I am going to move forward on this place unless I am just really screwing up some portion of this analysis. 

Any feedback is appreciated! Thank you!

Heather

Wow! Great job! Even with financing hiccups you made this work :)