All Forum Posts by: Javier D.

Originally posted by @Matt Popilek:

The main issue I would have with the number is the Maintenance number.  I would want 14-15% of the Gross Rent in that line item. You currently have $1000/month I would up it to $4600/month.  We average around 14% maintenance on the 800 units we own, so that is where I start at, and increase the number based on the age of the building. If the building has deferred maintenance I could increase this all the way up to 20%.  If you feel like the property is well maintained 14% should come close.  That will obviously negatively impact the income so I would adjust the purchase price accordingly.

 Thank you so much for your input Matt! Would that include cap ex? like the replacement reserve number I have or strictly repairs? The property is about 50 years old concrete. most big ticket items are being replaced before we close except roof . 

Oh I forgot. Value add: I can change most 1/1s to 2/1s (its about a half mixed rn) adding some rental income . also there is room to build which I probably won't but it sounds nice.

Good morning BP,

Thank you in advance for reading my post. I have over the past 10 years acquired 23 doors consisting of sfh and duplexes throughout Florida. Right now I'm working on a 40 unit about 4 hours from me which looks like this:

Monthly Operating Income	Scenario A
Total Rental Income	34,360.00
% Vacancy and Credit Losses	5.00%
Total Vacancy Loss	1,718.00
Other Monthly Income (laundry, vending, parking, etc.)	-
Gross Monthly Operating Income	32,642.00
Monthly Operating Expenses	Monthly
Property Management Fees	832.00
Repairs and Maintenance	1,000.00
Real Estate Taxes	5,241.00
Rental Property Insurance	1,959.00
Homeowners/Property Association Fees
Replacement Reserve	2,000.00
Utilities	1,291.00
- Water and Sewer
- Gas and Electricity
- Garbage
- Cable, Phone, Internet
Pest Control	155.00
Accounting and Legal	150.00
Advertising
Monthly Operating Expenses	12,628.00
Net Operating Income (NOI)
Total Annual Operating Income	391,704.00
Total Annual Operating Expense	151,536.00
Annual Net Operating Income	240,168.00
Capitalization Rate and Valuation
Desired Capitalization Rate	10.00%
Property Valuation (Offer Price)	2,401,680.00
Actual Purchase Price	3,100,000.00
Actual Capitalization Rate	7.75%
Loan Information
Down Payment	620,000.00
Loan Amount	2,320,000.00
Acquisition Costs and Loan Fees	60,000.00
Length of Mortgage (years)	30
Annual Interest Rate	4.970%
Initial Investment	680,000.00
Monthly Mortgage Payment (PI)	12,411.76
Annual Interest	114,527.10
Annual Principal	34,414.02
Total Annual Debt Service	148,941.12
Cash Flow and ROI
Total Monthly Cash Flow (before taxes)	7,602.24
Total Annual Cash Flow (before taxes)	91,226.88
Cash on Cash Return (ROI)	13.42%

The property is being given to me after completing 40 year certification (updated plumbing, electrical, parking, most units are decently remodeled. Only cap ex I see is the roof which I estimate will need to be replaced over the next 5 years (100k) . I added this into my replacement reserve at 2k a month included in my numbers.

The financing is as follows:

10 year fixed (2 year option interest only)

4.87%  interest only would be 119,280/year . principal+ interest 154,000.

Im thinking it is a decent deal based on either option as far as payments go. I'd probably go with interest only option first 2 years to get some of my principal back and fatten up my reserves. Im a little nervous as I am not used to multifamily (this is a 40 unit). What I do see is for 620 I put in Im cas hflowing 91-100k (my operating expenses are very conservative). There is some room for value add ( I think that is the term from what ive learned here). and the area is a good rental area. 

Is this something you would do? Am I in the right path here? Im questioning myself on it. Thank you for taking the time. I hope I was as specific as needed. 

@David Smit I understand what you’re trying to say and its A fUN tOPIC . ITS been interesting reading everyones outlook on it. I think this is more of an opportunity to introinspect. If you see a guy driving a lamborguini what is your first thought? Some will think gee i wonder what he does. Maybe i can ask him and learn something. Some will say look at this attention junkie. What a duoche. Truth is i WORK HARD TO BE THE FIRST GUY.we all carry defects of character. You choose what to feed. I dont believe entitlement works. I come from a socialist country. Eventually people get dragged down not carried up with that mentality. The true journey in a career of real estate FOR ME is to become a little wiser, achieve fiNAnCIAL InDEPENDENCENe AND HOPE TO GIVE MY CHILDREN A BETTER LIFE THAN I HAD , SAME AS MY PARENTS TRIED DOInG WITH ME. Self righteous ego trips can be dressed up with pretty words from anyone here including me. Truth be told I battle with greed from a place of financial fear. I try my best to have faith and in turn i dont act out on greed. Pigs get fed and hogs get slaughtered in this business. When i judge someones character based on their success whether a homeless person or a fellow sUCCESFUL investor , i immediately look within and try to correct that thought process. This isnt a personal attack as honestly i dont know you personally. SORRY FOR CAPs. pHONE IS GLITcHY. iLL gET a nEW oNE whEN i GET TO 25 DOORS tHIS mONtH LOL.

My current portfolio is as follows: 13 SFR (3/2s,4/2s) in lower middle income neighborhoods not leveraged getting about 12% IRR 4 Duplexes(8x2/1s) leveraged with 25% down getting about 17% IRR (mortgages on the two lots with 2 duplexes on each lot @5.25% rate) no escrow. All purchased at 10%-15% cap rate( i analyze deals as a flip) bought the houses between 80-150k and are all worth about 220-250k now. duplexes bought at 145k each worth about 240k each so there is some meat. I own my primary residence free and clear as well as my office/warehouse where i work out of. These are valued around 600k for the house and 250k for the warehouse (bought house for 275k in 2011, warehouse for 180k in 2014) I also have two flips in process one about to close for 300k (bought for 170k +45k in repairs. I have another flip in process in West florida  with a partner purchased at 370k +100k in repairs on market for 600k.

Hi Aaron,

I'm also looking at apartment buildings as the next phase of my real estate career. I would agree with @Jaysen Medhurst to sell that non performing investment tomorrow if not today : ). I think you have a pretty solid idea on the process. I would start there and build your liquid up through growing your portfolio with SFR/multi (2-4) units. These will be the easiest to find and learn on . Also will have enough cash flow and equity to build up your reserves the fastest. How nice would it be to have 10-20 SFR/duplexes cash flowing with some equity to then have an open door to creative financing/refi/blanket loans and acquire that bigger commercial apartment building then. From personal experience.. I would look into why you haven't sold that rental yet having so much real estate knowledge. Sometimes we get emotionally attached to a property and make mistakes that hinder us from growing. It's happened to me a couple of times and its definitely an important issue to address(again from personal experience). As an emotional buyer I've had to work hard to learn to walk away from deals and/or sell when needed. Again this is my personal experience and might not apply, but if it does... I hope I've helped you :).

is this the general contractor's subcontractor or yours directly?

If the gc hired him as part of the whole contract dont even waste anymore energy thinking about it. Its his problem. If he is yours then he should wait to even put receptacles in. Trim in and punch out should be done before final payment. You need to inspect his work and make sure everything works without issue before you pay him in full.

Why is drywall taking 2-3 weeks? Electrician needs to finish his job himself so he is accountable for any electrical issues that arise. 

@Dave Foster. You write real estate poetry my friend. Beautifully written and I can definitely agree I have felt that way. I've done some research on 1031 exchanges and will probably utilize it in the near future. I will reach out to you when that time comes. Thank you!

@Kenneth Mooney thank you for your wisdom. I would def. leverage what i have if something comes up that would give me a better irr. Ive been looking into some sort of portfolio heloc type financing but not hard enough. Sounds good as far as not narrowing my search! I tend to obsess and put the blinders on. Thank you again.