Originally posted by @Dan Kelley:
Jason,
Definitely consider coming to our Dubuque REI group. As Sarah mentioned, we meet once a month and it would be great to have more people come. In a situation like this, you could even let us know ahead of time that you're looking at a property and we could all run numbers on it and bring our results to compare and discuss.
To give you a comparison of what's out there, I purchased a 6 plex downtown Dubuque last year at $108k. Keep in mind, however, that my rents are lower and my location is not as nice.
As for the utilities, they don't seem too far out of line to me depending on what the tenants pay. My tenants pay electricity only and my Utilities were around $5400 last year, however I had 2 units vacant that I was paying electricity on. So the water usage will certainly go up with full occupancy, but I wouldn't imagine it would be much more than the $6600 you have estimated.
I ran the numbers on my spreadsheet and, at asking price, I came up with a 7.6% Cap and only $88.40/unit/month cash flow, which is below my minimum target of $100. In my opinion, it's not a great deal at current asking price, but we all have different ideas of what a good investment is.
Jared is very knowledgeable as a Realtor and also as an investor in the area, so I'd definitely take him up on his offer to meet as he would be a very valuable resource to you in the Dubuque market.
Let us know if you have any other questions and remember to search for Dubuque REI on Facebook and get hooked up with our REI group!
Happy Investing,
Dan
Thanks Dan! This is very helpful - I never knew a group like this existed in Dubuque. I will definitely come join the next meeting.
The owner of this property has a family who has lived there several years, a national guard vet who mows and does the snow removal in exchange for the garage and reduced rental. The other units are college kids who's parents usually cover the rent. The owner admits rent is possibly low (maybe a chance to increase it slightly at some point?). Never a problem getting renters with the location of the property.
I have a couple of questions.
1.) Is there a certain purchase price that does make this work? In my mind I was looking to target $285,000 for this property. Does that affect the numbers significantly? Not saying the owner would let it budge at this price, but I would be willing to walk away. How does $88.40 /mo fair on a deal though, is it an OK deal or terrible? What vacancy rate did you use? 10%? $6696 for utilities are the natural gas to run the boiler and the city of Dubuque - water,sewer, trash I assume. I am only going off the listing detail. I filled out a rental cash flow excel document that was fairly conservative and it says the return on investment (ROI) is 9.2%. I can share it with you via email if you want to take a quick look, I thought that was fairly decent. Maybe I had some of the values filled out incorrectly. insurance - $2670/yr. Total Rents bring in $50760 and expenses ($6696 utilities + $6746 taxes + $2670 insurance) + property management fee 10% , figure $200 mo , repairs/maint, $100 / mo accounting / legal. Purchase house for $285,000-$290,000 on a 20 year 4.5% loan
2.) When is the next meetup of the Dubuque REI group? I searched on Facebook "Dubuque Real Estate Investment" and did not find any groups.
3.) Are there property management groups in town you know of that are useful? I called Executive Management - there fees were 8% but they are full and not accepting new clients. Locators LTD is 10% and they charge half month rent each time the property is rented. My understanding is Executive Management did not charge this, so not sure how common it is. I am struggling to find someone who would provide the service. I am thinking of doing it myself as it sounds like one of the tenants does help out with some of the work.
4.) Regarding Dubuque Rental Rules - I plan to take the class this spring regarding rental regulations. Is there anything else I should know? I'm assuming there are yearly permit fees I need to factor in even if I don't manage it myself?
I plan to take a look at the property tomorrow for further inspection. I have already been preapproved by Dupaco - anything else I am missing regarding my investigation?
Thanks,
Jason
