All Forum Posts by: Kevin Farrell

Patrick, this gets to the heart of my question. I don't know the CAP rate for the area. It is a D area. Census data shows incomes in the immediate area to be mostly $30K or less per year. I am assuming a CAP rate of 10 to 12.

 Chris - Agree with the 10% vacancy, just didn't include that much detail. Thanks.

I am looking at an 8 unit apartment. Four 1br, 1ba and Four 2br, 1ba. I just got financial information and since Jan 2016 the income is up and down several times. They lose tenants, then get some units filled, then they lose tenants, etc. Right now they have two vacants. Rents are in line with the area - maybe a bit higher than average. Property is in good physical condition but there have been some expensive repairs and all the utilities seem high to me. I suspect that the tenants are not screened and that the management company is spending too much on repairs. I will learn more during due diligence. The property is listed for $189,900. The max income from rents is $3900 at 100% occupancy. Assuming 55% of gross income is going out to expenses (owner pays all utilities), then this has a CAP rate of 11.1%. With two vacancies the income from rents is $2800 today.

Here is the question: What is it worth? Using the $2800 and the CAP of 11.1, I calculate a value of $136,000. Is this an appropriate place to start my offer. The current owner has proven on paper that he can not control costs and can not keep tenants, so why would I offer more than this?

Thanks for any comments and suggestions.

Tim, I own a Pest Control company in Indianapolis. We deal with bats here frequently. I suggest that you or your tenants look outside the building as the sun is setting. If bats live in the structure you will see them exit. Whether there are 6 or 60, they all come out at once. If no bats are flying out, you don't have a bat problem. You may have had just one lost bat.

I would not recommend spending $1200 on one bat.

Let me know if you have more questions.

I own a pest control business in Indianapolis. My opinion is the landlord should take care of the pest control. When you allow a tenant to live with roaches or BB because they won't or can't pay for Pest Control, you get the problem to deal with when they are gone. By that time, the surrounding units are also infested to some degree. When your building starts to have these problems word travels fast and the good people leave first. Michael Stanton and Sue Kelly both mentioned inspections and I strongly agree. We offer quarterly inspections with perimeter spray inside. This gives us good control and we get to see a problem before it gets out of hand. Plus, we can price the service to include treatment of all pests (including BB) for one monthly fee. 

Contact me for more information on what we do here and tips on hiring a pest conrol company for your property.

Mark, that's interesting. Different utilities in Indy so I won't assume it is t h e same here. Thanks for posting.

 Thanks for sharing your experience. It seems like a contractor could specialize in doing this kind of work and maybe streamline the process a bit.

 Both properties are located in Indiana. I will look into permits etc.

Thanks Joe. Is that $5000 per utility per unit. Or is the budget just $5K per unit for electric and water.

And would you agree that this expense is well worth it?

I am looking at a triplex and a six unit. Both were converted from large SFH to multi family a long time ago. The landords currently pay utilities which I think is insane. I want to know if any of you have a rough idea of the cost of adding water meters, electric meters, gas meters. I know it depends upon where we are located but I was hoping to put some numbers in my analysis.

For instance, I have assumed that it will cost me $1,000 to add each meter plus any required internal plumbing/wiring to get everything run correctly. My assumption is that inside installation will cost at least $2000 per home.

I will call the local utilities because I think they have a flat rate for doing the outside work. I won't be able to get contractor quotes for the inside work until I have a contract.

These two properties are priced to sell and have some issues but I know that getting separate meters on them will be worth whatever it costs. Thanks for any suggestions.