All Forum Posts by: John Cassel

All the replies are so helpful.  I am going to put a plan together and work on including all the things mentioned above.

Thank you to all that took the time to reach out!

Thank you for the help Sam and Stephanie.  I figured those were the important things but it’s nice to get some confirmation 

I just bought a 3 unit property in September that needs some minor upgrades.  I purchased the property with a 20 year commercial loans because the down payment funds were not seasoned in an account.  I plan to refinance the property at the 6 month mark into a 30 year fixed mortgage and I was wondering what types of improvements boost the appraisal the most.  I bought the property for 75k and it appraised at 102k at the time of purchase but I would love to be able to get the appraisal up to 115k-120k if possible.

At the moment, the plan is to repaint the property (lots of peeling paint on the outside) and redo two of the bathrooms that drastically needed upgrades.  We also plan to up the rents once the upgrades are done since the tenants are all currently on M to M leases. 

Any advice on best ways to get the highest appraisal would be greatly appreciated!

Thanks,
John

Tom, Chris, Marc & Melvin,

Thank you so much for the responses.  Unfortunately I will not know if my retirement account allows me to pull it out until Friday because the job I had the account with is in the middle of switching carriers and transferring funds. 

I specifically made it a point to all the lenders that that was my plan from the get go because I didn't want to run into this issue.  I guess I didn't stress the point enough. 

I am going to double check about it being considered the reserve funds but my guess is know since it was the lender that actually suggested it.  If worst case scenario I need to get a family member on the loan that shouldn't be a problem because I have a lot of family/friends that are looking to invest. 

Two questions...If I choose to do hard money and then refinance, do banks normally want me to hold it for a time period, say a year before they are willing to do that?  And secondly, are portfolio lenders comfortable with family/friends investing if I go that route for future deals.  If not I may need to rework my plan a little to continue to grow.

Once again, thank you for all the responses and help!

John

My brother and I are currently have a contract to purchase a triplex in our area for $134k. We are planning on doing conventional financing at 75% LTV which makes our down payment and closing amount around $40k. Originally we were planning on putting down $25k and having family/friends invest for the other $15k. With all expenses, debt and management considered the property is conservatively projected to make 12% COC return. We were going to structure it to pay out 8% simple interest to our family and friends that invested. All the banks I talked to seemed fine with this idea until time came to finalize the loan.

Is there any way to structure the investment like this to get around the bank financing issue?  They want to see that we have all the funds personally but the only way we will be able to do that is if I am able to pull out my retirement funds to close and then pay those funds back with investor money after the fact.

What am I missing?  Is this something a portfolio lender should be comfortable with.  I want to be able to continue to grow our portfolio but using a mix of our funds and family/friends investments.

Any help would be greatly appreciated!  Thanks in advance.

John Cassel

Over the last year I have been learning everything I can about investing in Real Estate.  I have read numerous books, listened to 100s of podcasts, watched youtube videos and have been reading everything on Bigger Pockets.  Through a connection at work I have stumbled upon an investment property that I want to purchase but since it is my first deal I want to make sure I am not missing something important.

I developed a friendship with a colleague at work and he was gracious enough to take me around to see his rental properties.  He is older, makes a high salary and all of his rental properties are fully paid off.  He says he doesn't really need the money and would like to start selling some of his properties for less hassle.  He is not actively selling any of his deals but he told me if I was interested to let him know and he would be willing to sell for a fair price.

The property I am interested in is an old funeral home that was converted to a 7 unit investment property (4 small businesses & 3 one bed room apartments).  He has not raised the rents for any of the apartments in years and all of the businesses have been there for years and are taken care of by a commercial management company. There are also 17 parking spaces and a two car heated garage.  5 of the parking spaces are rented to a business right across the street.  There are two AC Units in the building, one for first and one for second floor, that are only 1-2 years old.  Boiler is original.  Here is the financials for the last 12 months of the property

Income (yearly)

Business 1 - $5580 (after mgmt. fee)

Business 2 - $5580 (after mgmt. fee)

Business 3 - $9820 (after mgmt. fee)

Business 4 - $8091 (after mgmt. fee)

Apt 1 - $5220

Apt 2 - $5700

Apt 3 - $6300

Basement  - $1920 (rented out twice a month for VFW meeting)

Parking - $1500

Total - $49711

Expenses

HOI - $1539

Elec - $2274

Gas - $3781

Taxes  - $9067

Sewer - $1778

Lawn  - $1650 (lawn, flowers, snow)

Reno  - $511 (locks, paint, drywall, caulk)

Maint - $800

BoilerIns - $62

Vacancy -  $4971 (10% added by me)

CapEX (8%) - $3977 (added by me)

Bath Sup - $320

Total   - $30730

NOI - $18981

Debt - $12420 (assuming 75%LTV and $250,000 purchase price)

CF     - $6561

COC - $(6561/62,500) = 10.5 %

Currently the average 1 bed room rent for the area is $585 which is well above the current rents.  Each unit also has a brand new washer/dryer and the tenants do not pay any of the utilities so there is a serious value add opportunity.  I believe I could also take down the lawn/snow cost because I would be doing it all myself.  I would aim to get the price at $225-230k as the assessment office current appraisal is 200k even though that is not a good value for multi family.  The place is very well taken care of since it was an old funeral home. The roof is still in good shape which might mean my cap ex is a little high but id rather be conservative on my numbers.

Any comments, things I missed, any errors or just any help in general would be greatly appreciated. I preferably want to go for properties closer to the 15% COC return mark but I think that is easily attainable with some slight rent increases closer to market.

Thank you!

John