All Forum Posts by: Justine Ade

Hey Chris, 

I think we are talking about the same thing. Here is how I've added it into my numbers. 

Leasing fee = 1 mo rent = $650 

$650 x 8 units = $5200

Then divide $5200 by what you think the average occupancy is in months. So in this example I assumed an average occupancy of 12 mo. 

$5200 / 12 = $433

If the average occupancy were 2 years ( in this case this is realistic as I am told these are long term tenants ) then my leasing fee averaged over those months would by $5200 / 24 = $217

Hey Steve thanks for this input. Metro area is definitely experiencing job and population growth - really strong market. I'd say this is a C class building (1948 build) in a solid B class area (good school system, decent amount of new construction over the last 5 years, low crime). There are absolutely zero amenities though. 

For the insurance I just received a rough estimate from my insurance agent who said to estimate $4000 , but likely will get something less expensive. 

Agreed I probably should up the rehab budget. I was told the building had "good mechanicals" with a new furnace in the last 5 years but that's about all the info I have. Plus the units do still need some cosmetic upgrades. Perhaps 70-100k would be more fitting.

Sounds like the more I talk to more seasoned investors the less I think this is a wholesale "deal" . The highest I couldprobably go on this building would be 250k based one what I've discussed with others. I do have a commercial lender that is willing to do 75% LTV. They don't know details of location but they know it is near the 900k city so maybe that might change once they know details.

Thanks for these details! 

Bigger city population is 900k. Mid size area is 50k

The rents are actually pretty much at market rent between $600-700 for similar size 1b/1b units. Plus I'd still have to at least make some cosmetic updates to this property. So it sounds like based on what you said this would not be worth pursuing since rents are pretty much already at market rate. What if the purchase price was lowered significantly ?

With regard to the utility billback - I'm told the units are already separately metered so I don't think that it would be too difficult to implement? Unless you meant buy in from the current tenants. 

Hey Jonathan ! Thanks for the response. My optimism for this property was based on me billing back the utilities which would bring my cash flow up to over $1000 a month 

Hey everyone! I was wondering if I could get some opinions with seasoned investors on this deal. The numbers look great if I have everything in correctly (my only questions are property insurance, rehab costs but everything else is pretty much confirmed). 

My biggest concern is the fact that this building is in a small town - the upside is that it is only 30 minutes away from a large metropolitan area and 20 minutes away from a medium sized town from the other side. Would this concern you?

The property: 8 unit Multifamily building. 1b/1b each side rented for $650 each . All occupied except for 1 vacant unit . All tenants are paying as far as we know. Utilities are not billed back to tenants but have separate meters.

Location: small town of 14000 people but like I said, 30 minutes from a large metropolitan area, 15min away from a Kroger grocery store, 20 minutes away from another medium size town on the other side

Listing price: $350,000.

Closing costs: $14,000 (includes agent commission, wholesale deal)

Repairs: $30,000 (very rough estimate)

Financing 75% of purchase price = $262000 . Interest rate of 4.0% Am. Over 20 years, 5 yr balloon. Down Payment of $87500

Total Acquisition Cost = $87500 + $30000 + $14000 = $131500

Gross income: $5200 / month

Monthly Expenses:

PM at 9% = $421

Leasing fees = $433

Maintenance at 10% = $520

Monthly Utilities (currently paid by owner) = $750-1000

Property taxes $267

Insurance = $250

Principal and Interest = $1585

Vacancy at 10% = $520

TOTAL expenses = $4996

CASH FLOW = $5200 – 4996 = $203 / month = $2436 a year

CoC Return without utility billback = 2% ($2436 / $131500)

If I bill back utilities the CoC return would be 10% and would look like this:

Gross Income: $5200

Expenses: $3996

Cash Flow: $1204 = $14,448 per year

Coc Return = $14,448 / $131500 = 11%

What do you guys think? Does the location concern you even though most of the units are currently rented with long term tenants?

Sorry for the long post. Appreciate any nuggets of wisdom!

@Patrick G Poopathi

I’m new in the Indy market as well. Feel free to message if you want to navigate the waters together ! Good luck

@Peter B.

Great post. Thanks for sharing . Was this your first development project ? Do you mind sharing numbers on what you put in and what profits are expected ?

@Bonnie Rhodes

Didn’t invest into a retirement account until I was 27. Able to max out my retirement account and HSA at 29. Starting to read about real estate now that I’m 30 and hoping to get my first rental property(ies) at 31 .

@Jonathan R McLaughlin

I think it's very interesting you invest in higher owner occupancy rate area vs rentals. New to REI and I'm looking in a similar market but this was actually a factor that is drawing me away from the area. Could you explain why this is something that works for you? Thanks , J