All Forum Posts by: J Hurwitz

Thank you all again for the advice.  It sounds like I need to get on the phone with some electricians and determine the scope and cost of the K&T wiring issue.  

@Michael J. My realtor has honestly been great for me so far, I'm not really worried that he doesn't have my best interests at heart.  I just always try to be conscious of the biases someone may have so I'm naturally suspicious.

@Bruce Woodruff That is good to know.  I've been reading up on K&T wiring and you are clearly right - this is something I'd need to address one way or another before the purchase.

@Karen Margrave The inspection report did list additional items, I just excerpted those that jumped out at me.  There were a few other issues that seemed more trivial (e.g., a loose railing, needing new smoke detectors, etc.).  I'll definitely be working in the next few days to quantify the costs of the necessary repairs and determine if the purchase still makes sense after factoring them in. 

Thank you both for the feedback!  I don't really have any idea what I'm doing so your guidance is really helpful.  

@Michael J. The contract says inspection requests may be made for "health, safety, and structural related issues only" but I don't think the seller is contractually obligated to make any repairs.  I'm using a conventional loan.  I'll definitely talk with my realtor about getting the seller to address some/all of these issues.

@Bruce Woodruff There is definitely some knob and tube wiring - that's noted elsewhere in the inspection report.  This house is over 100 years old.  However, my understanding is basically all houses in this market are around that age.  Is knob and tube wiring common in houses that are that old?  Is a rewire required whenever there's knob and tube wiring?  

I was unfortunately not able to accompany the home inspector during the inspection.  I can still call him if I have any questions, though.  I agree the issue is probably more extensive than just the thermostat, I'm just wondering how someone lived through 5+ winters without heat?

Hello good people,

I'm in the inspection period for my first home purchase.  The inspection report came back yesterday and it identified a few items I'm not sure how to react to.  How concerned should I be about the following?

• One of the closets "has exposed asbestos material on ductwork that should be professionally encapsulated or removed."
• "The electrical service to the house is outdated and needs to be upgraded/replaced by a licensed electrician to 200 amps with each unit having 100 amp circuit breakers along with an owner’s meter/panel for the common circuits (instead of the old fuse panels)."
• "The second floor unit thermostat is not working and the tenant said they have not used the heating system for over five years."  (For context, the house is in the Northeast and there are very cold winters)
• "The two chimneys need to be repaired and re-pointed by a licensed mason."
• "The second floor bathroom exhaust fan appears it may venting into the attic space and needs to be re-routed to the exterior."

I'm talking with my realtor soon to go over the severity of these items.  However, I'm conscious that (1) the home inspector's job is to point out as many problems with the property as possible, and (2) my realtor is incentivized to make the deal go through.  Any unbiased third-party opinions would be greatly appreciated!

@Evan Polaski, thank you again for such a detailed reply!  It makes sense that there would be turnover costs every time a tenant leaves and that as an investor, you shouldn't skimp on those costs, otherwise you risk not being able to attract high-quality tenants.  It also makes certain capital expenditures, such as roof repairs, can be "lumpy" in that they can be large in one year and non-existent in the next (although they're guaranteed to occur if you own property long enough).  I'll factor that into my analysis going forward!

Thank you for the feedback!  I'm not sure of the property's condition as I haven't inspected it yet.  Two of the three units are currently rented and from the listing pictures it looks to be in OK condition, but obviously more due diligence is needed.  Increasing the capex estimate would quickly begin eating into the returns!

Do you incur the ~$1,000 cost of turning a unit every time there is tenant turnover in a unit, or rather is that only incurred when you purchase the property?  In other words, is that a recurring expense, or is it one time?

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I'm looking to take the plunge and make my first investment in a multi-family property.  This analysis assumes I can get $20k below asking, but the property has been on the market for 2 months now and there's been one $20k price drop already.  Good people of BiggerPockets - does this seem like a reasonable deal to you?  Any feedback, thoughts, or advice would be greatly appreciated! 

Hi all, newbie here.  I currently own zero property and am looking to begin buying and holding multi-family properties.  I identified a property that seems like a strong investment opportunity and am hoping that the good people here could provide some second opinions.  Any thoughts, feedback, or advice would be greatly appreciated!

The property is a fully rented 3-family listed for $245k, currently grossing $32,400 per year.  I calculated the year one cash on cash return using the following assumptions:

• 10% vacancy rate -> Annual gross rent of $29,160
• 30-year mortgage at 4% with 25% down -> Annual mortgage of $10,527
• Assessed value increases to $245k -> Annual property tax of $4,533
• 1% of the purchase price per year in maintenance -> Annual expense of $2,450
• Insurance costs of $2,200 (per listing)
• Utilities of $1,500 (per listing)
• 10% of gross rents to a property manager

If I did my math right, those assumptions produce an annual cash flow of roughly $5k, which represents an ~8% return on a $61k down payment.  Obviously, there'd be much more due diligence to conduct if I went forward with purchasing this property.  However, this is the type of analysis I'd like to use to screen investment opportunities at a high level.  Does this seem like a reasonable approach?  Do you agree this property could be a good investment candidate?