All Forum Posts by: Keith Martin

I have a deal under contract and am looking for a recommendation for a good commercial real estate broker in Indiana.  It is in the Indianapolis area.   I am an out of state investor but have a local team there. 

Thanks!

@ross 

@Ross Denman I appreciate the insight.  My gut was telling me that but it is good to hear it from someone "on the ground".  Thank you!

@Jeff 

@Jeff Keller Thank you, I will take a look!

Hello!  I have been looking at sub-markets around the Indianapolis area (within 20 miles or so).  I was hoping to get some insights into the Lebanon and Whitestown areas as far as the economics/demographics.  They look like good B- to C range markets.  Not too bad on crime rates.

Anyone out there that can help me out with a little more information?

Thank you

Keith Martin

Hi @Matthew Schroeder,  

Good points.  I am working off the offering memorandum so all that has to be verified.  

Thanks to everyone for you input.  Maybe not too good to be true but still a deal to be pursued further.

Hi @J Scott,

The property is not under contract yet.  These are pro forma at this point.  All of your points are good ones I need to resolve during due diligence.  The property management deal is  a 6% base with an allocation yet to be nailed down.  I left 3.7 pts in maintenance for the allocation so I am close to 10% in reality.  The contract maintenance has the turnover costs in it for vacancy turn over.

Thanks for the feedback!

Hey @Ramon Jenkins,

Thanks for the reply.  I'll look at how to put a file up.  As for the other questions, here's what I know at this point.

• Property management -> I’m estimating a minimum 9 – 12 %.  Right, I have the 6% base plus I left 3.7% in Maintenance for the allocation fee they talked about.  Puts me right in the range you mention
• Will you be out sourcing the grass and snow removal?  Grass and snow removal are in Landscaping which is based on 2014 actuals
• Would this property be occupied by students or everyday resident in the community?  occupants are every day residents it's not in a "college town".
• You might need 25% – 30% for down payment. Right, I figured the 20% down to get to a 80% LTV. But you are right I might need 5-10% from the current owner.
• Current owner be willing to carry 2nd note for this property?

Thanks again!

I have been looking for multi-family opportunities to get started in REI. I've come across this deal that seems too good to be true. Help me understand where I've gone wrong on the 24 unit deal.

I have put in some assumptions about mortgage rates, terms, interest only, etc.  I have a quote from a management company for 6% of gross rent collected plus the cost of staff allocation (still to be nailed down), so I left a figure in Maintenance to allow for that in addition to the 6% they quoted.  

It meets the 1% rule and the 50% rule.  It's running at an 8% vacancy and I figure we can get it to 5% with better management (there is some evidence of lackluster management).  But the numbers work at 8%. I have a 2% rent inflation rate built in. I built in some inflation on the expense side in the out years based on the ratios in Yr 1. 

My target goal is a cap rate of 10%. With a purchase price of $720K it yields a 11.3% cap rate. With the numbers I have run, the NOI and my target cap rate yield a value of $815K so maybe not a lot of room to get a 10% discount. After Yr 1 with resolving the vacancy rate, it looks like I could re-fi and get some equity out for further investing.

I go by the doctrine of if it seems to good to be true it usually is, so BP'ers, what am I missing?  I'll get better details of the costs once I get into the due diligence phase.

@Jenn Baker I know it's hard but look at this as an opportunity.  What about using the cash to help buy a small multi-family where you live in one of the units?  Use the experience to eventually leverage into more real estate.   Get a job for living expenses but eventually get to the point of no more j.o.b. ... 

Hey @Jeff G., It can't hurt.  Having dealt with several estates on the selling end, it is sometimes a relief to get a solicitation "out of the blue".  Otherwise the personal rep has to engage a real estate agent and list it for sale.  It may not work out every time but every once in a while you'll find a gem where the family is moved away and dealing with things long distance.  They just want to be done with the  estate issues an move on.  It might be worth offering to take care of any remaining items in the house after they've cleared out the items of value they want from the house.  That way they don't have to tidy it up for showings and a sale.