All Forum Posts by: John Warren

Hi BP community!

I am getting ready to, hopefully), buy my first commercial sized apartment building this year. In preparation, I will be practicing my underwriting skills on a closed multi deal in my target area every day. Today will be my first attempt, and I would love to get feedback on my analysis from you more experienced folks here. This deal is coming of the MLS, which I have access to as a broker. I am trying to figure out which parts of this pro forma data are completely out of line. This property was purchased by "Belgium Investments", so I doubt this is mom and pop group! Here it goes!

Property address: 5010 W. 18th street, Cicero, Illinois

Sold price:  $665,000

Units: 19 1 and 2 bedroom units.

Rent Range: $600-775 (The MLS does not specify individual unit prices)

Gross Income: $164,700 (This seems really, really high... less than 1% vacancy in a C-/D area seems highly unlikely to me!)

Expenses: $52,355

-Janitor $400

-Water $11,000

-Repairs- $1000 (This seems so unlikely for a 19 unit!)

-Fuel- $10,200

-Scavenger- $2740

-Electric- $1800

-Insurance- $4400

-Taxes- $20,815

Net Operating Income: $112,345

Pro forma cap rate=17

Here is my take away from this. I believe that the expense are way too low. I also think that there are numbers missing. Obviously no property management is considered, but there is also no mention of snow removal or landscaping which I found out. The janitor expense seems interesting as well as I am not sure who charges $33 per month to clean a common area...

Here is what I would guess the building really looks like:

Gross income minus 10% vacancy factor= $148770

NOI using the 50% rule= $74,385

True cap rate then would be 11.4. Not bad, but not as rosy as the pro forma. So how did I do? Let me know your thoughts!

Thanks for the response, and your right @chris seventy! definitely forgot the numbers. This place has a two units with two beds/1 bath, one unit with one bed/one bath and an attic bedroom with a half bath.

The seller threw out a price of 350,000 with taxes around 12k per year. Two bedroom units are going for $1400-1600 per month and one bedroom units for 1100-1200. 

I will be checking with the town to see if the Aric unit could be converted to a studio or if it is usable at all. 

Hi BP community! 

I have what I think may be a deal, but I would love your feedback. I found an off market duplex/triplex in an A neighborhood. Here are the pros:

-it may be considered a legal non conforming triplex. I am checking this.

- the location is AMAZING! And it has a garage which is rare. 

- the exterior needs very little work.

- the rents will be very high. 

-a possibility for some serious appreciation 

Here are the cons as I see them.

-it was built in the 1880s and has lots of old plumbing and electrical. 

-the two units upstairs need some reconfiguration and all three kitchens should probably be replaced.

-I am estimating around 50 grand worth of stuff that would need to be fixed in this place. 

So what do you all think? This would be my second deal and my family would be occupying one of the units. There is serious potential at the right price!!!

Hi BP community,

I am a huge fan of all of the advice from the podcasts and forums here to treat real estate as a business and hire out where needed, but I am curious if a lot of you that are "handy" started out doing a lot of your own rehabbing. The only deal's I am seeing right now require a good amount of work, and as a younger investor I often wonder where to draw the line. I have done lots of painting, trim work, cabinet installing, etc so far. I have mostly hired out electrical and plumbing.

So what did all of you more experienced investors do when you started out? Did you hire a lot of this, or did you get your hands dirty until you had the capital to make it work as a more passive investment?

@Jose Martin we targeted all the Multi family owners in our town! We are getting all kinds of leads. Our biggest problem is deciding what to do with them 

Thanks for the feedback everyone! @j scott there is definitely a nice margin on this deal. The seller threw out 350k during the first conversation and the comps I pulled are all over 700k in this neighborhood.

I appreciate the good tip about days on be market as well @Russell Brazil! I will be looking into that. 

Thanks as well @Julia Blythe for showing some numbers from a similar flip. I was thinking it would cost quite a bit to do this right and it looks like you have had a similar experience.

I am currently speaking with an experienced flipper. We may partner to do this deal which would be my ideal situation since she and her husband have done many flips successfully.

I am looking for general advice on how to handle a first flip. I have a very interesting off-market opportunity in an "A+" neighborhood. It would be a fairly expensive flip, but the upside is also pretty amazing. Is it better to start with a "safe" flip, or just go big if the opportunity is there?

Hi BP community,

My wife and I bit the bullet and did our first Direct Mail marketing campaign. We have a very good problem! We sent 70 letters and have had 9 calls! Five of them are leads on multi-families that we will be pursuing, but we found out about two very interesting off-market opportunities that would be good flips. We were not expecting this much response or that it would happen this fast!

What should we do with these opportunities? We probably don't have enough capital to take on flips at the moment and I had never considered wholesaling until now! Where should I begin!

Welcome to BP! Check out the podcasts. I have learned a great deal from them 

Congrats! Check out Chicagland Brokers. I have been happy there and the low cost of maintaining a license is very "investor friendly"!