All Forum Posts by: John Cassel

@Elisha Salgado  I invest more in the York/Harrisburg/Lancaster area but have looked up that was as well.  I am always interested in networking with nearby investors and helping people get started.  Feel free to message me!

John

@Nicholas Williams to piggy back off of what @Luka Milicevic said, to really supercharge your start into investing I would see if you could do a house hack on a small multifamily.  Try a 2-4 unit.  Depending on in Philly you are looking, you may need to widen the scope to make this possible as far as purchase price goes.  However, it will give you a huge leg up if you can get a 3 unit and have almost all of your living expenses covered by the other tenants.  This also will allow you to have your own space instead of renting out a room. 

If I could go back and do it all over again, that is how I would have started off.  Feel free to reach out to me if you have any questions.  I am actually doing a Lunch & Learn tomorrow on this exact topic.

Hope this helps!

John

I agree with @Scott Trench.  I would do probably one of two things.

-Find someone with capital to partner with on a small multifamily to get started.  Offer to do most of the work as in paperwork, accounting and managing since they will be bringing more funds.

-If you can find a great deal and negotiate seller financing, you may be able to get into a 3-4 unit (depending on area) with only that $10,000 or maybe $10,000 and some change.

This way you get your first deal under your belt and then will be able to get more people to invest with you and trust you moving forward!

Join John Cassel as he breaks down how YOU can eliminate YOUR living expenses through Multifamily Real Estate Investing.

About this event

In this Lunch and Learn, John will cover the following topics:

-What is Multifamily House Hacking

-The benefits of Multifamily House Hacking

-What type of properties you should look for when House Hacking

-The simplest way to break down a Multifamily House Hack Deal

-How a House Hack can turbo charge your investing and help you reach Financial Freedom sooner

VIP Attendees Will Receive:

1) Property Tracker Spreadsheet

2) Simple MF House Hack Calculator

3) eBook "How to Search for Profitable Multifamily Properties" by John Cassel

4) 3 Multifamily Investor Deal Analysis Walk-through videos

VIP Package is a $150.00 value for only $14.97

Please join John Cassel as he dives into the causes of inflation and how Multifamily Real Estate investing can help you get the upper hand.

About this event

In this Lunch and Learn, John will cover the following topics:

-What is inflation

-Why inflation should concern you personally

-Advantages of Multifamily Real Estate

-The perfect investing strategy to combat inflation

-How to execute the investing strategy

-How Multifamily will help you achieve Financial Freedom

VIP Attendees Will Receive:

1) Property Tracker Spreadsheet

2) Simplified Refinance Calculator

3) eBook "How to Search for Profitable Multifamily Properties" by John Cassel

4) 3 Multifamily Investor Deal Analysis Walkthrough videos

VIP Package is a $150.00 value for only $19.97

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $462,000
Cash invested: $140,000

Combo deal, 5 unit apartment building and 26 unit mobile home park. Appraised for $760 at purchase.

Value add business plan
-Apartment rents $425 at purchase, $995 after renovation
-Mobile Home Lots $200 avg at purchase, $350 with rent bumps over time

What made you interested in investing in this type of deal?

Discounted purchase price and big opportunity to add value.

How did you find this deal and how did you negotiate it?

A investor/wholesaler brought it to me. I had met him from networking on biggerpockets.com

How did you finance this deal?

Commercial Loan

How did you add value to the deal?

Renovated apartments and cleaned up the property including deferred maintenance.

@Richard Appleby to build on what James said, I actually go with a higher vacancy rate 8%-10% because it is more conservative and allows you to account for rent ready if a tenant leaves. I also would bump up the cap ex costs as well. For quick numbers on a property I will use 10% for CapEx and then like James said, I will dig in further once I see the property.

The only other thing that caught my eye was the financing.  Do you have it lined up for a lender @ 3.5%?  Usually investment properties come in higher so you might be closer to 4-4.5% right now depending credit/financial situation.  Also, if it is a 4 unit you should be able to get a loan for 30 years to help lower payment & increase cashflow

Hope this helps!

John 

@Eric Bentley as others said above, with a quick adjustment to a commercial loan 20 year and upping rate to 4.5% this goes to negative cash flow pretty quickly.  With out a decent bump to income through improving rents this is likely not to be a good cash flow play. 

Building on what @Tim Herman said, in my opinion a good starting point for smaller MFs such as this one is 10% Mgmt, 10% Maint, & 10% CapEx. The CapEx and Maint could go lower if the property is in good shape or is newer but it is a safe measurement when quickly looking at deals. I usually use a vacancy of 8-10% as well. If I buy the property to do a lot of renovations I will even factor in a higher vacancy rate the first year or two if I expect a lot of turnover.

Hope this helps!

John

Gernot, I assume you will be managing this yourself since that cost wasn't included?  If your numbers are correct it looks like a great deal unless it is in a war zone.  The taxes seem low but that is based on taxes in PA so I could be totally off in that regard.  Also, are the tenants covering all utilities?  

$2300 per unit x 3, with tenant paid utilities for only $315k seems like a screaming deal.

Hope this helps!
John

To follow up on what @Guifre Mora said, here are the main things I would look at since it is a 3 unit and a quick breakdown for analyzing it.

Income

Rental income

  -Vacancy/Loss to lease (depends on area but 10% of income would be a good general figured to go with)

Other income (if applicable, might have coin washers/dryers since it is near a college)

Total Income

Expenses

Property Management Fees (10% of income)

Repairs and Maintenance (10-15% of income)

Real Estate Taxes (can find on county's tax assessor's website)

CapEX/Reserves (Can vary greatly based on condition of the property, roofs, HVAC, etc.  I would use 5-10%) Tenant Covered Utilities (get from owners, or use average for the area) Insurance (200-300 per unit) Other Misc (Pest Control, Lawn/Landscaping, Legal, Acct - I would use maybe 300-500 per unit, maybe more depending on property needs) Total Expenses NOI (Total Income - Total Expenses) Cash Flow (NOI-yearly mortgage pmts) For the loan, since it is 4 units and under you should be able to get a 30 year fixed mortgage, probably 75% LTV or 25% down, figure in another 5-7% of purchase price for closing, and depending on your credit my guess would be an interest rate of 4-5%. If you dont have the expense #'s from the owner you can do a quick analysis by using just 50% of the income as expenses to get you a quick number.  Also, to determine if it is a good investment you can calculate ROI or Cash on Cash return by taking the yearly cash flow/down payment+closing cost+any reno costs. Hope this helps a little bit! Thanks, John