All Forum Posts by: Joseph Hoot

@Tom T.: thanks for the suggestion!  I will have to reach out to him.

@Jason D.great points!  And yeah... not sure about the neighborhood.  Trulia shows a lot of green with regards to crime.  But the school system in Athens is below normal.  So that will be one drawback to any future tenants (just a guess).

Hi BP Community!

I'm trying to get a better handle on property analysis and adjustments that I should be making when analyzing a deal.  I'd like to take this property as an example and see what input others have:

I use a tool called "Property Evaluator" on my iPhone.  I really like this tool.  I know there are many others out there.  But here are the screenshots from the calculations it gives me:

Questions & Comments:

1. Assumptions:
   • Given the last image, do those seem like fair numbers to be using?  $417 is about 42% of income.  But given the 50% rule, it is close.  Are there any other expenses I should be accounting for?
   • I also like the idea of assuming the property is being managed.  So 10% added on for that.
2. Mortgage:
   • At first thought, I wanted to use a 10yr or 15yr mortgage to not have to pay as much in interest.  But then, after thinking about it more, my tenants would be paying for the P&I.  In that case, wouldn't it be better to take out 30yr mortgages so I could have more cash on hand to use for downpayments on more properties (where other tenants could be paying down those P&I's)?
3. With a 30yr mortgage, the Cash Flow seems pretty good to me. I heard Brandon Turner talk about preferring 15-20% CoC and getting >=$100/month on cash flow. I think this fits that.
4. I haven't compared comps yet, but would normally I would go to Zillow for prices of similar homes sold in the 1-3 mile area (maybe more, if necessary).  But I have a sense that this may be a fair asking price.
5. I would normally also probably go to things like rentometer, apartments.com, zillow, and not sure what other sites to see if what the listing says about $500/month is normal for that area.
6. I'd probably then double-check to validate with the county website to verify taxes have been paid.
7. And I would certainly want to touch base with the listing agent/owner to understand if they could supply a rent roll, utility costs, better understanding of who pays for what, how long the leases are good through, if any new CapEx-related equipment was purchased recently (or how old this stuff is). But other than that, does anyone see any other things that I should be looking into?

Overall, this seems like it might be an okay deal.  Based on my understanding above, I think I would probably be willing to make offers up to about $60,000 (I'm not at this point yet, so others feel free to jump on this).  

Does anyone see anything I'm missing?  I have no doubt that there are plenty of other things I should be considering when looking for a property.  But I'm hoping to hear some constructive feedback on how others might addon to what I'm looking at here.

What do others think?

@Travis Thornton: Thanks for the quick response. I'll have to look into the TIC. And yes, I completely agree about the attorney being involved to finalize/legalize any negotiations for the partnership. However, I would love to go into a conversation with a suggested set of properties I've reviewed in the area (pictures, examples of financing, example pro formas, etc..). By the way, I found a fantastic iPhone app that I just love called Property Evaluator to help with this. I'd also love to show some suggestions as to the structure of the TIC (presentation of an example operating agreement). I'm thinking that it would be a more professional way to do it before approaching the attorneys to make things official.

This is a great thread. I have two friends that I could potentially see doing something like this with. Does anyone on this thread have an example operating agreement that you would mind sharing for a 50/50 type situation like this? I would love to be able to structure a new LLC using an operating agreement like that as a template, and then adjust accordingly.

Welcome Adam

Hi Lindsay.  Glad to hear you are getting back into real estate and BP!

Thanks for the input Derrick.  I'm aware of the >4 unit making it commercial.  But once it is considered commercial, what will that mean for the investor?  For example, do the mortgage lendors require maybe 30% down payment instead of 25%?  Do they offer terms that are greater than 15 years?  When an invester leases out a commercial property, other than potentially asking for longer lease agreements, what other things should I be thinking about?

By the way, I currently live in the Buffalo area.  But since I'll be moving to Georgia over the next 3-4 months, I updated my profile to start networking with others from that area.

Although I'm very new to real estate investing, I've been reading a ton of material and taking notes along the way.  One thing I haven't dealt with is any reading on mixed use property.

I was looking at 601 Fulton St., Buffalo, NY as a potential investment.  Since that time, it looks like it sold for $23,000.  They originally started listing it last year for ~$48,000.  It looks like it needs a lot of new windows, some work inside, and probably a new garage door over the next year or two.  So $23k was probably the right price.

It's two buildings that are 2-units each + an extra area at the front that was once a store front.

In this situation, we have 4-units = residential between two buildings.  I think I understand everything that I need to deal with that.  But I've never dealt with understanding what it would mean with mortgage terms and such when dealing with a potential commercial unit.  

Would someone mind helping me understand what I might expect to change once that fifth unit is available on the property?   If I were to have purchased these two buildings and started just renting out the 4-units, then later wanted to lease out a commercial unit, how might that affect my loans?  Are there any other things I would be concerned about?   Does anyone have any recommended reading with regards to mixed use investments?

Thanks,

Joe

welcome to BP Karen