All Forum Posts by: Ki Lee

@Greg Dickerson thank you.  I thought that it made sense, but wasn't sure and wanted to double check.

Artificial numbers that are easy to work with -

PP-$1,000,000

downpayment - $200,000

Capex - $100,000

Year 1 NOI - ($20,000)

Debt service - $50,000

Year 1 cash flow ($70,000)

So, basically , year 1 has negative NOI of $20K and negavtive cash flow of $70,000 for the property to be stabilized.

The investor sets up an operating account for year 1 expenses.  He sets aside $70,000, and it is withdrawn as needed.  all $70,000 becomes depleted on year 1. 

I'm getting a little confused as to how to properly calculate COC in this case.

1.  What is the total invested amount?  Is it ($200K+$100K=$300K), or ($200K+$100k+$70k=$370K)?

2.  If the total cash invested is the second scenario($370k), then is the year 1 cash flow still ($70k)?  It seems like the $70k is double counted in this case - It is accounted for in the initial investment AND it's counted again as negative cash flow on year 1.  It seems like if we account for $70K on the initial investment, the loss from year one is absorbed from the operating account and the year 1 cash flow is 0?

I would appreciate some clarification here.  Thanks

@Jordan Moorhead

I’m looking at 20-50 units 

$1.5M-$2.5M range.  I find that Austin is a very popular investment area and it seemed like the assets are trading at around 5-5.5cap.  I find it a little challenging to make the investment work at this low of a cap and I was wondering what the Austin investors’ strategies are in such a strong seller’s market

@Jordan Moorhead @Or Y.

What is your strategy in Austin for MF?  Obviously Austin has phenomenal metrics like population growth, job growth, job diversity, etc...  But it seems like the market is so darn competitive.  Out of state buyers and swarming in and it seems like the assets are trading for like 5-5.5 cap(true cap rate) at best.  Are you looking to acquire assets at this low cap that has significantly lower than market rent with high forced appreciation potential? Or are you looking primarily for market appreciation? Or are you able to find deals with higher caps where it can cash flow?

Thanks for the help, guys.  Very good suggestions, indeed

I’m under contract to sell my 3plex in Chicago.  The tenant notified my PM that the buyer’ agent entered the unit for showing to a prospective buyer after only 24 hour notification (48 hours is required by Chicago RLTO).  According to RLTO, the landlord who breaks this can be fined up to 1 or 2 months of rent.  

So the tenant is demanding this, the PM is pressuring me to abide by the request.

The listing agent is telling me that no lawyer is going to take this case and I should be closing on the property in 30 days, and then it will be over with. He recommended not giving any break to the tenant..  He apologized for not giving proper notice.  I guess he pushed the line a little bit in hopes of not losing promising prospective buyers...

What would you do? 

Thanks.

@Michael Ablan, @Bjorn Ahlblad thanks for the input.  Just put in an offer.  Will update .

Hey BP,

I'm considering a MF investment in the Ohio area that has pretty solid bones and good potential.  It's townhouse style garden apartments, 2bd 1ba in a C+/B- area.  Definitely not war zone, but lower working class neighborhood.  I found out that some of the buildings had leaking roofs in the past which caused some molds in ceilings and walls and basements of a lot of the units.  The roofs have been fixed since, but I'm trying to see what this will do for my eligibility to get covered for insurance, to qualify for a loan, and also how much resale value is affected?  Is this a big can of worms for potential liability, too?  Obviously, an inspection is required and there are different degrees, but I want to know if this is generally a big red flag that's going to be a massive headache in the future.  What's your experience?  Do I have to immediately address all mold issues before qualifying for loan/insurance, etc?  The issue is that it spans across many units as the units share walls and ceilings.  fixing the issue for all affected units sounds like a big project. 

Thanks.

BP,

What would be a good estimate for a complete rehab a 1BR/1BA 650sqft Class B unit in Columbus, OH?  Units are functional but very outdated.  Will need new carpets, paint, tiles, faucets, toilet, tub, kitchen counter, and more to bring them up to market rent.  I know that there are many variables involved, but what would be a good estimate for cost and the timeline for each unit?  Also, should these expenses be added in the initial acquisition cost (as renovation) or spread out over time as cap ex?

@Alan Lott I’m not sure what you have in mind, but you can PM me.  Note that I’m doing a 1031 exchange, so any kind of creative financing won’t really work.