All Forum Posts by: Jestin Sorenson

@John Woodrich And I appreciate your help. I'm on here because I don't know what I'm doing in commercial. I feel like I have a better understanding of this now, than when I first posted but at the end of the day, I will give the end buyer all the documents I have and they can evaluate it themselves. It doesn't matter what I say and I'm not trying to inflate numbers. If the owner is lying and trying to inflate numbers, the deal will not go through. I'm at the numbers I'm at and if they get different numbers, maybe I will learn something. I'm not making a ton of money on this deal. I'm a wholesaler trying to bring a deal together. I'm more the mediator or the facilitator. Same as when I send out single family homes I have under contract. I haven't been putting comps in there. Do your own due diligence. People don't care what I think the ARV is or how much repairs the home needs. They should and will do their own homework if they want to work with me.

@John Woodrich Once again, I appreciate the feedback. First of all, I haven't sent this out to anyone. The numbers have only jumped for this post as when I posted this I had no idea what I was doing. I have P & L statements. That's what I'm basing my numbers off of. The last P & L was for 2017 and that's where I was getting the rents from. He updated me on the 2018 rents when I went I met him for the first time last week. Once I have it under contract, the end buyer can get whatever information from me that they want. The owner is being very cooperative with everything and can get me anything I need. 

There is still room for improvement in the rents if you want to put money into renovating the units more. A 2 bed could easily go for $1000 in this area. I'm not sure how many commercial properties you own, but value add doesn't just mean being able to increase rents. You can increase value in a myriad of ways. Including cutting cost on repairs and utilities. Renting garage stalls and storage space, laundry etc.

I'm not the end buyer here. They're going to have their own financing. I'll move with the first buyer with the most credibility. Thanks again

Hi @John Woodrich, thanks for bringing this up. I wasn't even aware. After doing some calculations myself, the numbers aren't that far off for me. The numbers have changed through this post a few times. After speaking with the owner, he told me he had raised the rents to $900 for the (5) 2 beds and $800 for the (1) 1 bed bringing in $5300 per mo. My calculations then have an NOI of at least 30k. I've got property management in there, as it should be, but the current owner doesn't have a property manager and so it's not a part of his bottom line. This includes vacancy. The repairs are high in the 2016 P & L because the owner had stated that he put some home repair supplies in there ($4000 to be exact). Whether or not that's true, the repairs are a bit higher than they should be and could be lowered with proper management. The utilities are high as well and could be lowered. Something could be done with the garage and basement. Maybe charge for storage. There's a lot of value add here, in addition to what's already there.

With that said, I'm not sure how the lender looks at this information. With 25% down, 5.5% interest and a 25 year am, I calculate the mortgage to be at $24,876. 24,876 x 1.25 = $31,095. Current NOI $30k. We're in the ballpark. That doesn't include the mortgage for the seller carry back. A lot will depend on the terms we discuss for that. No interest, maybe a 30 yr am. If the seller is motivated and he wants this deal to go through, he will be flexible on his terms so that the lender will feel comfortable with this transaction.

Let me know if these numbers make sense to you or if I'm way off. I can share the spread sheet with you if you'd like. I got it from here. I have this property at a 6.5 cap. That's not bad for Minneapolis or the area. It's not a smokin deal, but I think the seller carry back is enticing for people as there's not as high of a buy in. I see four-plexes going for more than $400k and this one is $450k. This was a good learning experience for me to evaluate a commercial property. I think I can find a buyer. I have a lot of interest so far.

@William Brown Ok. I'm ok with 10k. A few of these people are newer investors. I will have it under contract next week. Should I wait until then and shop it around. All of the people I'm talking to seem newer and could back out either because they don't have the funds or they don't know how to evaluate it. I don't really have any one person thats a closer at this point, with the people that Im talking to. One guy is doing a 1031, but he could change his mind at any time. I guess I've never worked with any of them. How do I vet them? Maybe a proof of funds? Should I sit down and have coffee with them? This is really good information. I appreciate your advice!

@William Brown That's great advice! I think I've moved over to having the abundance mindset.  I'm ok with 10-20k. I already told someone that I'm going to add a 10k assignment fee to it, but I am getting a lot of interest. If I changed it to 20k, would that be bad at this point, since I've already told him 10k?

I know there will be other deals out there. I'm not worried about that, but I also want to make money. I'm a little confused about not shopping it around. Maybe I can PM you and we can talk more about that. My concern is that, if I only have one or two people interested, and one of them falls through or we inspect the place, he doesn't like it. I don't own the property and am not sure how many times I want to invade the tenants personal residence. If I shop it around, I can have all of them there at the same time. Or a couple of them there at least. What do you think about that? I don't need to do highest and best, I just don't want anyone chickening out on the deal or not going through with it. Of course, I would get a 5k deposit, but I'm only gonna get that after inspection. I haven't even seen the entire property yet. I've only been shown a couple units. Thanks for the advice!

@Kelly Conrad @Tim Swierczek I'm an investor/wholesaler that invests in Payne/phalen area and I live here as well. I come across properties in the area all the time. PM me :)

Hi @Mike Juliff I'm a local wholesaler in the twin cities area. I actually have a 4 plex owner that I'm talking to. Its in the Newport area. Not sure if you're interested in that. I get properties under contract far cheaper than anything you will find on the mls. This 4 plex has some value add. I could use some renovating. Looking at maybe 315 or 325k for it. PM me if interested. I am also looking at 2 6 unit apartment buildings with low buy in. I negotiated with the owner on one and got the price to 450k with a 50k seller carry back. So the buyer would only need 50k to buy the place. Not sure where you're at monetarily. That's a really low buy in for a 6 unit and you could homestead it. 

I was at the apartment investors meetup today. 200 letters is not going to cut it. I send out thousands of postcards every month. The response rate is around 1%. At 200 letters, you're looking at 2 calls and thats not going to cut it. You also need to be consistent and send out letters every 2 months. Sometimes you wont get a call until your 3rd or 4th mailer. Let me know if interested in anything. PM me and we can go from there.

@William Brown I was just talking to someone about that today. There're thermostats in every unit when the heat is being paid for by the owner, it could be regulated better. The water may be able to be submetered or at least worked into the lease. I appreciate your advice. Esp the part where the fee doesn't have to be huge. I'm fine just making a 10k assignment, but I also don't want to be a fool and not collect a 30-50k assignment when appropriate. If I source a really good deal. That makes total sense.

@Jameson Sullivan I spoke with the owner again today. He told me that he had raised the rents, so I will have to look at the leases, but that would add more to the NOI. I'm looking at a 30k NOI now, based on that info, plus value add for the utilities. With that said, I believe we are at a 6.5 cap.

There is also a 4k expense for repairs-other. The owner said those were expenses for his house. I'm not sure how to prove that, but if correct changes the expenses again. 2017 it was $100. 2016 $4053.

With this new information, I was able to negotiate with the seller for a purchase price of $450k with 50k or 10% seller carry back, which I think sweetens the deal. Now, there's a lower barrier to entry as the person buying this property may only need to come up with 50k to buy the property with a 10k assignment fee. That brings a lot more potential for buyers. Any Joe smo looking  to invest in an apartment building and has 50k could be a winner.

I appreciate all the responses on this. I was able to reach out to some brokers/realtors in the area and get some really solid advice on how to approach this. I've got another 6 unit building that I'm ready to start negotiating as soon as the dust settles with this one.

@Jameson Sullivan What would be a good NOI you would look for at 400k? Cap rates are low here too.

5-6.5 cap rates for this area. It's actually 23k NOI. I misquoted that. I actually think there's not much room for improvement with the rents if money isn't put into the building. For some reason, the utility bill doubled from last year to this year and I'm not sure why. Even 23k NOI is barely break even with a 300k mortgage. 25% x 400k = 300k is how I came to that. I talked to a commercial realtor today who helped me out a bit. I don't know if the buyer can pay 500k. He has a preapproved loan of up to 450k and some cash, but he didn't say how much.

I didn't even know how much to wholesale the property for or what would be a good deal. 10k wholesale fee would be good enough for me.

He has a low mortgage on the property and no property management that I'm aware of. He has his handyman do it. I'm not sure.

@Jenny Moore I don't mind the wait for your money/landlord business. I have a few rentals and am not in need of dire money right now, but looking at the numbers, I'm not sure 5% is worth it. If we're talking about profit, that's like 1k per year not including equity and that's not worth it to me even as a landlord with no responsibilities. That's if there is a profit.

I think I need to keep it simple. You guys are right and thank you so much for the input everyone!!

Hey guys,

I have a lead on a 6 unit apartment building. I have a buyer. I don't know enough about evaluating a 6 unit to even know what to get it under contract for. The buyer is open to discussing terms. I know you guys need to a lot more info about the property, but as a ball park, what might be a good whole fee or equity percentage for a finders fee. Instead of wholesaling the property, I could get a portion of the equity. What would be a fair amount? The 6 units noi is about 18k per year. Purchase price is 4-500k. I need to negotiate that still. Any help on navigating this or something that at least points me in the general direction would be greatly appreciated. Let me know if you need more info. There is possible value add of bringing the rents up from 800 to 1000 per month per unit. There is also a basement and garage that could be more value add. Prob C class neighborhood.