All Forum Posts by: Joshua M.

Hey Chad,

Thanks for the input. We do plan to move eventually, but an interim move - with 2 kids - would be a bit of a hassle.

I used value = NOI / CAP with a CAP rate equal to the 8.7 the original owner was using to set his purchase price. I do, vaguely, remember him saying something about a local rate but my ears were not tuned at the timed.

We've learned much in the last 3 years ......!

I'm going through the same question In this thread.

Aah man!! My wonderful ASCII art didn't make it ... and here I thought I was so clever .....

Thanks, everybody, for weighing in. I've been processing all of this information and well ... I guess I'll try to bring it back to '94 with a little

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I have been reviewing my notes and crunching numbers. I made a little chart below. I based the values on the 8.7 % CAP that I initially used when purchasing the property (right or wrong). The 'when purchased' figures are from the previous owner's numbers (which, incidentally, make me think that I need to get my expenses down just a bit). 'Max' represents our having left and renting some extra space (more on that later).

| CAP | value | LTV

----------------------------|---------|--------------|-----------

when purchased | 8.7 | 250,000 | .9

----------------------------|---------|--------------|-----------

now | 6.5 | 185,518 | 1.2

----------------------------|---------|--------------|-----------

we leave | 11.7 | 332,611 | .67

----------------------------|---------|--------------|-----------

max | 14.2 | 404,446 | .55

Geoff, you nailed it!

Scott, the property is owed in my name. I have been planning on changing that to an LLC. My business is an LLC and I have been planning to rent my basement to the business LLC already - and I have spoken, at least preliminary, to my accountant about this with no obvious objection. Both businesses being (what do they call it?) flow through entities, the net gain to my bottom line is unchanged, but it seemed like a way to inflate the property value. It seems like a logical extension of the idea to pay rent to the property LLC for the space I inhabit - even though I hadn't consider that further rental income as well.

I haven't had time to process DSCR, but I will certainly do so. Thank you for the suggestion, Bill. Also, it seems reasonable to expect a bank, when considering the coverage of debt by rental income to prefer realized income. [duh]

It is obvious that my property is more valuable without me in it.

Scott, may I ask ... what was the process for the cash out refinance of your 5 plex? How long had you owned it? Had it been renting at that level of income for years? months? What can I expect? What was the appraisal process like? How much wood CAN a woodchuck chuck?

Thanks everybody! I

Thanks, Ken. I guess one difference between our 2 situations would be that your SF would be appraised based on comparable homes where my commercial multifamily would be appraised based on the income. My specific question is whether that rental income must be realized prior to being considered in the appraisal or may potential income count towards a praised value.

I guess I'm trying to figure out if I have to move out in order to realize the full potential of this income property.

I really appreciate your input Ken. I will certainly calculate that LTV, as I hadn't been considering that aspect. Thanks again, Ken.

Hello BP! I troll around here as time permits and have recently been seeking information pertaining to a specific question (or series of them) without really nailing down an answer with the kind of experiential wisdom that I have come to expect and appreciate from the BP knowledge bank. So, any input would be both welcome and appreciated.

We (my wife and I as tenants in common) own a 5 plex that we purchased for $250,000 with $20,000 down, owner financed. It has been about 3 years now and we've gained about $5,000 in equity through payments to principal. My question pertains to the equity we have created through improvements to the property and increased rents.

We have completely remodeled 3 units. One of which, our only 2BR, we occupy with our 2 children. In our market, I estimate we could rent this unit for $900-$1,000. The other 4 units rent between $625 and $700. We have made extensive repairs (more than I planned on, honestly) including a substantial re-wire, plumbing repairs, new roof, insulating of the attic, and we plan to re-side this summer. By the end of the year we will have an attractive, fully remodeled 5-plex in a decent area close to the University, shops, hospital, etc..

Preliminary calculating the commercial value as a function of the NOI and assuming a 10 cap we would seem to have gained a decent amount of equity - if we do not occupy the 2BR. Or am I wrong? The actual commercial value is set by the actual income of the property, is it not? and not the potential income of the property? and after 2 years of tax returns? Would this plan require us to relocate our family?

I am not opposed to relocation. The additional rental income will almost cover renting a single family for us to hop into, but if we don't have to I would prefer to not incur the additional expense and potential stress/upheaval.

Ultimately, I am desirous of using the value of our equity as a contribution to a down payment, along with some savings, towards a future loan on a more appropriate setting for my family.

I am open to selling, switching, stripping (equity), or other necessary means so don't hold back your suggestions. I spent almost 10 years in the woods of Northern Maine, the only guy for a mile in every direction, and I am seriously motivated to plop my but into a rocking chair on a wrap around porch in the middle 100 acres ....

Experiences, critiques, questions, etc are all welcome. Thank you very much!

Chris,in my experience bleach would not be the thing to use. I always use a double acting mold control solution. You spray it on and it kills the mold and the mold spores. Then it dried and forms a layer over the organic material which will greatly inhibit any further mold growth. The best part is you can easily purchase it in most hardware stores, around here at least. I would also be using some big fans and dehumidifiers in every room. Mold won't grow under something like 42 percent humidity.

In these parts (Maine) we don't install too many in slab heating ducts, so I can't speak specifically to that. But, I've done plenty of concrete work. If I were you, I would look to verify that there was adequate drainage underneath the slab. Obviously, you can't look under the slab, but you could verify a perimeter drain which should run to day light somewhere - especially if it sits on a hill. If moisture is trapped under that slab it will wick up through to whatever is on top of it and you will soon have more mold issues.

I hope that helps.