All Forum Posts by: Jeff J.

I am a telemark skier, when I was learning I read a lot of forums about "the form".  One of the best quotes I read went "a turn is a turn", meaning it doesn't matter how your turn looked, as long as you executed it when you wanted, like you wanted.  You did a great job, your investment is making money, which is the goal.  You had enough risk margin to absorb a loan that may not be optimal, and you have already learned a few lessons.  Things should only go up from here.  Congratulations!

There is also an economy of volume.  A large building is cheaper to operate on a SF basis than a smaller building.

You want a small market with a good basic economy, in a place that people want to live in and one or two large employers that are not going anywhere anytime soon.  You can probably buy 10-12 cap properties all day long with limited competition.  There are dozens of these kind of markets across the United States and almost none of them are towns you have heard of.  You probably won't make a lot in appreciation, but you will make money and have a nice life.

My first apartment purchase was financed by a bank loan where I provided the down payment by cashing out an IRA. That was 5 years ago, we now have 120+ rentals. My subsequent apartment purchases have been financed by increasing value of existing stock and refinancing. This is a viable path if you can assume the initial risk.

J. Beard asked the best question. Y O U have to have a plan.  If you are coming to a web browser to figure out if you have a plan, the answer is probably obvious.  This might be a good deal, but if you don't know how to exploit it take this as a learning opportunity and be prepared the next time an opportunity comes around.  If you are looking, there is lots of opportunity.  I've bought a bunch of stuff, I've never had to validate my decision with anyone, much less strangers.

I notice no one has really answered your question yet.  I recently installed two HWH in my buildings.  One building houses 24 studio apartments, the other is 20 1BR.  Both are commercial 200,000 BTU units.  One is a high end efficient system that cost $12,500 to install, the other is a mid-range work horse that cost $7,500.  The high end deal has been temperamental and already required replacement of two major sub-systems.  The mid-range has been a champ.  I would recommend the highest end commonly purchased thing.  Both are Rheem's.  The difference between a commercial and residential unit is the recharge rate.  The commercial systems will recharge at 100g/hr all day long.  Residential's don't have the same recharge capacity, and even with a bulk storage tank will quickly burn out trying to keep up (a lesson from experience, there).  It's a tough pill to swallow, but if you have a central system you should to go with a commercial system, they last a long time.  You can probably get by with a 125k - 200k BTU system, depending what type of apartments you have.  You might want to have your plumber do a use analysis to ascertain the correct system.  Also, I live where craft labor is expensive, so you might be able to do better with a similar system if you have more competition.

If you are mo-mo, all you have to do is provide the contracted notice in the lease.  I recently let a problematic Sec.-8 tenant go by giving the 30 day notice.  You want to contact the local sec.-8 case worker and let them know what your doing so they can transfer the payment to where ever the tenant moves.  

At the end of the day your particular market will drive the decision for the more desirable units.  Where I live 1BR and efficiency/studios are fairly popular.  I own both, plus a few 3BR/1BA units.  My observation is that the greater your floor area to wall area ratio is the less expensive the apartment is to maintain and renovate.  Put another way, the efficiencies are much less to maintain than the 1BR's.  Fewer windows to deal with, wall's to paint, floors to refinish and so forth.  So all things being equal that is a consideration.

Jim, The most important metric is if you think you can make enough money from the deal to reward your risk exposure, and that you can articulate that idea to investors. 

My strategy tends to look for stuff that is undervalued and needs a little work and TLC to unlock it's potential - elbow-grease projects, I call them.

Do I understand why the thing is under-valued?

Can I put a plan in place to unlock the value?

Do I have confidence in my skill set to manage the risk?  

If I can say yes to these questions, then those other metrics are what I use to drive a valuation to bound incoming liability and use that to either strike a deal, or not.  

This is a process that you confidently own that is independent of the asking price, so it is less of a "buy/don't buy" and more of a "this is what the thing is worth" issue.

Your operational strategy might be different, but the concept is the same - are you confident you can make the right amount of money.

Have fun....Jeff

I'm no expert, but I have bought a foreclosed apartment complex from a bank.  I simply called the commercial loan officer at the bank and said I was interested in the property.  He put me in touch with the receiver who funneled what info he had to me.  I had an agreement before they listed the place.  

If the bank has already foreclosed, then they own the property and shouldn't have any problem letting you in to inspect, unless they have a liquidation strategy that precludes dealing with a mom-and-pop.

From the banks perspective, this is a soggy hunk of crap.  My experience is that they are usually pretty eager to talk to someone who is interested in taking it off their hands.