All Forum Posts by: Kellyn Cameron

Hey everyone! 

So I'm in the middle of negotiating an off-market owner-financed deal. The other day I went and saw the property and was surprised by what I saw. The landlord currently pays for gas and water. I was surprised to find the property already had two water heaters. My question is simply... what's the best way to go from here to put the utilities on the tenants? I assume all the ductwork is already in if there is a boiler. Is the best thing to do to put in a boiler and meter or are there other options? Open to any and all feedback. Thanks!

@Zane Cress

I've thought the same. How would a clause look? If the property doesn't appraise for at least what I paid then the balloon automatically renews for another 2 years? 

@Zane Cress

How important should price and downpayment be in a deal like this? I'll always remember the Pace Morbys line about letting the seller name the price but then the buy gets terms. My worry would be having enough equity in 2 years to be able to refinance.  

@Zane Cress @Liron Cohen @Ian Murray

Thank you for all the great feedback.

I think the utilities are a great place to look for potential income growth here. I agree the numbers seem high and it is eating up $1100/month in cash flow. Crazy!

I am trying to get the numbers to work while accounting for capex, repairs, and vacancies. Margins are tight. I'll update everyone on the potential deal in place. The deal is a master lease deal as I mentioned before. I'd make a downpayment to the seller (5%-7%) and then I would pay them monthly with part of that payment going toward the principal paydown. I would have 2 years to find financing. The seller also wants to include an incentive that if I find financing within 1 year they will knock another 10k off principal. The seller would still carry insurance and pay taxes until I finalized the purchase. Personally, as of right now, the numbers aren't where I want them to be (10-12% COC. BUT in this market that is going to be really tough to get and I think this deal has a ton of potential.

PROS - Getting 3 properties for a low downpayment, the possibility of splitting utilities

CONS - playing the interest rate game, COC return isn't where I want it

Would love to know your thoughts on this deal. Is it worth it? Everyone has their risk level and their goals. Despite not hitting my investment goals I think this deal is huge potential and might be worth the risk. 

THOUGHTS?

@Zane Cress @Ben Trageser

Thanks for your feedback.

I don't exactly feel comfortable betting on interest rates going lower. Although I think they will, its just not a game I want to really get into. There is some room for rent to go up. Another aspect I'm looking into is on two of the properties gas & water are included which is currently costing the seller about $1000 per month. That seems like a lot. All units are 3/1 and there are families occupying the units but I'm looking into possibly limiting costs there as well. This area isn't really a great area for short or medium-term rentals. The advantage to this deal would be getting into 3 properties for 5% down.

Another option that we just talked about is basically a mix between a complete owner-finance deal and rent-to-own. I'd put 5% down and pay the seller monthly. The purchase price would be locked in at the agreed-upon price and I'd have two years to find financing. Cash flow is going to be low due to high-interest rates and low down payment. Doing this would put expenses at about $5700 and income at about $6400 which leaves me with about $600 free cash flow. BUT these numbers DO NOT include saving for repairs, capex, vacancy, etc.

Thoughts? Any other creative ideas? 

Hello Everyone!

I'm looking for advice/ideas on how to structure a potential deal. It is an off-market deal with another investor friend. I think it's the type of deal that could really help me scale my business but just not sure how to structure it. Also, I feel a little like the deal is basically a bet on lower interest rates in 3-5 years, which I'm not sure I like. All properties would be buy and hold. Any feedback good or bad is welcomed. 

Purchase Price: $555,000

Downpayment: $25,000

The seller has agreed to finance 10% (55k)

Estimated interest rate: 8.5%

Loan 1 (bank) - $475,000 (est. payment $4122)

Loan 2 (seller) - $55,000 (est. payment $329)

All expenses (Mortgages, Taxes, Utilities, Insurance, 15% of gross rents for repairs, vacancy, etc.) = $6600

Rental income = $6420 (room for growth here)

So my question is... is it worth basically breaking even and hoping the interest rates go back to normal levels? Pros would include getting to 3 properties for only 5% down. All units are basically turnkey outside of a few small cosmetic repairs I can handle myself. Deals are tight right now with the interest rate where it is and I think this could be a good opportunity to get in for low cost. Any thoughts are appreciated! Thanks everyone!

Thanks, everyone!! I appreciate the advice and I'm going to go with what the numbers say. That being said.. how much are you budgeting right now for CapEx, Repairs, and Vacancy. I'm budgeting 5%/5%/5% right now. Is that enough? The unit has a lot of new updates. The only big worries right now would be a new furnace within the next 5 years and a new roof (only on the unit garage was done this year) within the next 10 years. At 5% both of those would be covered.

@Cory Lader @Jamie Hoth @Nathan Gesner @Curtis Bluth @Account Closed

Hi everyone - 

I have a potential off-market deal and I need some opinions from more experienced investors. 

I met with the seller and they told me they would prefer not to list it on MLS but would if they didn't get the offer they wanted. Well after talking for several minutes they told me two numbers. The number they would list it for if they went to MLS and the number they would take off market. The off-market number was about 6% less. When I run my numbers at this price I come out with about 8% coc roi. My goal was to get 10-12%. While we were talking the seller also mentioned that is possible in the next several years they will be looking to sell off numerous other MFHs.

So... my question is do I offer the number that meets my goal of 10-12% or do I offer what they said they want, take a little less return in hopes of creating a relationship and possibly having a chance at more of their properties in the future. Obviously, they might not accept either offer but I'm totally new to this and just wondering if anyone has some advice! Thanks!

 Let me know how that turns out for you!!! I am currently not in a place where that is an option for me because we rent a room out in our primary, but I would love to hear how that goes for you.

I would definitely recommend doing it yourself with a 27 day minimum. There will be minimal work on your end, especially if you have a really good cleaner and team built up.