All Forum Posts by: Jason Chen

Start with $105,000 and move up to maybe $120,000?

Summed up in a picture. When it comes down to finally deciding YES/NO on a property

Here's what I would first look for:

How is the condition of the roof? I'm gonna say a new roof is gonna run you $20,000-$25,000 but I am being very roughly approximate here. You're not going to get it done for $5,000, and you're not going to have to pay $50,000.

How are the air conditioning systems? Is it just a window unit for each unit, or is there central air conditioning? 

How much do you HONESTLY and REALISTICALLY think it will rent for? I can tell you right off the bat that I'd be dumbfounded if all 9 units rent out for $900, or even 850 quickly, and speed is the key for the first year of cash flow properties imo. Without even looking at it, I'm gonna say its going to be more like $600 or $650 a month to make it in SERIOUS demand, and $700 a month might be doable as well. $700 and $750 a month would be even more doable if it is in a PRIME location in Daytona Beach, but I doubt its in a prime location (Im a Floridian too).

How much is it going to cost to repair? Your ability to rent out this property actually isn't going to even be that hard. I can already tell that this place is not bad...you just got to get it running off the ground. The big question is, how much are the renovations going to cost? 2/1 bedrooms will rent easily in places like Daytona Beach all day long, provided you undercut the competition by $50-100 (just for the first year as you fill it up with the first 3 or 4 families for this 9 unit).

If I were in Daytona Beach, this seems like something I would be willing to pay $270,000-$280,000 max for this (including repair costs). Or $30,000 a unit. I'm guessing there's a second floor to this property as well which is kind of good news imo (less square footage for new roof which I'm sure it probably needs). There's a good chance that the current owner just does not have enough money himself to rehab and rent out the place and is somewhat desperate to sell.

Assuming the electrical wiring and the plumbing is still intact, why not offer something like $140,000, and be willing to go up to $180,000? That would be about $20,000 a unit, and if you rent them out at $675 a month, you're in the money.

Get a lower bid.

Always anticipate these costs by setting aside about 10% of your rental income into a repair reserve fund. Like $500 a year, so that after 20 years (assuming youre doing super long term holding), you'll have $10,000 to repair a roof or A/C. The 10% number I use is just a rough and convenient number.

If you factored the old age of the A/C unit into the purchase price and cost of the property when you bought it (like you should have), then you should be ok.

This isn't as big of a disaster as it seems - you just need to get it replaced and done for a good price.

I believe the most aggressive strategy in general with real estate is to have both cash flow properties AND to have rehab projects going on at the same time. The cash flow properties exist in your portfolio for obvious reasons, and the rehab flips earn you extra capital to keep it rolling into a bigger one as time passes. I have yet to flip a house though. Central Florida should be doable, but I seldom search out properties that seem like a good flip, because a good flip usually is simultaneously a good cashflowing buy/hold type of property. I trade in the stock market and such when I want to get my speculating on

Upon a third inspection, i see that the original poster responded to the posts

My main question is, if you were able to get a $1,000,000+ loan from a bank, how come you didn't go for different property? Why that one in particular? Yes, I can see why the numbers make sense for you and how much each door makes for you. Yes, I can see the value add when you finally start raising the rent prices, but was there a particular reason why you didn't choose something else like a 30-40 unit apartment for around the same price (assuming one was available i your state)?

 theres nothing wrong with your post. upon a second inspection, i see that there are no details about how the property was financed and whatnot. i was actually hoping to learn how he would get an enormous loan all to himself like that at the age of 21, but so far, i havent read anything.

then i paid attention to the selling price of the property: $1,300,000. that much money for 20 units cant be a good deal. i mean, i could be wrong, but thats $65,000 a unit. folks, we shouldnt promote and encourage something where the guy mightve actually gotten fleeced and didnt even know it.

now if he had said $36,000 cash flow per year, and the property cost him $400,000 or even $500,000, then thats a real celebration, but methinks something is amoss here. i will go ahead and read this entire thread for more details

 the #1 thing that i have learned about real estate is that pretty much everyone you deal with is going to be hilariously greedy. this isnt my experience 100% of the time, but it is like that 99% of the time.

i dont know about you, but seeing a property that is reasonably valued at $120,000 listed for $205,000 is outright ridiculous to me. all that tells me is that the owner is not in a desperate situation. most deals can only be had when the seller is downright desperate from my experience.

in terms of deals ive seen hat are good in florida - i have seen absolutely zero since then EXCEPT maybe one, which was in a slightly remote location. the name of the motel is the Tangerine Inn (find it on google) in Volusian county here in florida, and i believe its a 12 unit foreclosure a few years ago that was listed for $160,000. 

the low price piqued my interest, and upon inspection, i saw that it was actually a doable deal, but only average. there wasnt a lot of competition nearby, but the place was very old looking and outdated. it required about $90,000 to fully renovate, and maybe $40,000 to get a few rooms up and running at first.

a few weeks ago, i checked the volusia county property appraiser and saw that it sold for $60,000 in 2014 which was not bad at all. i called them and they charged a ridiculously high $80 a night for a crappy room. my guess is that they average only about a 35% occupancy rate whereas i have about a 90% i maintain throughout the whole year.

besides that, every pther motel deal ive found online through sites such as loopnet were hilariously bad. $600,000 for a 10 unit motel. $950,000 for a 13 unit motel in clearwater beach.

i will add more to this soon

it was purchased with a HELOC that hadnt been used yet

me and my family have been familiar with the motel business for a very long time

finding the right manager is tricky but not too hard. you have to show them the ropes and how to deal with customers because motel guests are peculiar. he current manager is very reliable and lives there with her husband. generally you want to find a very stable couple who is old. she is also the housekeeper. its the kind of job that many people want, but few truly qualify as you dont want an untrustworthy person for obvious reasons.

the manager lives there 24/7, but can leave sometimes throughout the day during the late afternoon/evening to run errands and such.

 what if he just decided to sell one of his triplexes for $215,000? then get it reappraised a month later and use his OWN sale as a comp?