All Forum Posts by: Kyle Lewis

@Amber Gonion, great suggestion, thank you! We'll absolutely be looking for new revenue streams and ways to save or transfer costs to the tenants. In a podcast the other day, I heard about an investor who repurposed his laundry room into a communal area, transferred water costs to the tenants, installed hookups in all units, and gave them the option to lease a washing machine and dryer for ~$35/month. I love these types of ideas. Thanks again!

@Amber Gonion, great point. My $725 number is based off of a similar size 1 BR 1 BA unit in a 6/8-unit building on the same street currently on the market at $750/mo. That doesn't mean that it will rent for $750, so I agree with your point and acknowledge this is an area we'll have to do a lot more research over the next few weeks.

@Preet Bains Absolutely, here is a link to the excel file I'm using. I looked at close to 50 from the file exchange on BP and really like this one. However, I'm always surprised to see that Property Management Leasing Fees usually aren't included in deal analysis templates, so I've added the input 'Tenant Duration' and amortized the cost of Leasing Fees. And great feedback regarding the research that should go into the income and expense fluctuations over time and property management. I think I agree on hiring a professional property manager, but was surprised to see that it was more expensive than giving away a unit.

Awesome, thanks @Jonathan Towell!

@Jonathan Towell thanks for the great feedback!

1. Good catch. I've fixed that and attached a new screenshot. This change decreases the cash ROI of the rehab scenario to below the market rent scenario. But my goal would be to maximize NOI by repositioning the property and selling at an ~8 cap rate for hopefully $560,000 in 5-10 years. Thoughts?
2. I've lumped all maintenance, repairs, and CapEx into one line item at $7,200 per year, which is 10% of current rents. Until I get the property thoroughly inspected, I won't have a very accurate sense of CapEx over the next 5-10 years. Any recommendation for a rule of thumb to use in situations like this? I've heard anywhere from 6-9% is a good estimate for repairs and CapEx but not sure if this includes maintenance.
3. Still waiting to hear about utilities. Hoping and assuming all utilities will be paid by the tenants but if not, will have to estimate those costs and add them into the model.
4. Not sure how to project these numbers. Any recommendations?

Also, it would be cheaper for me to offer free rent for one unit in exchange for property management than to pay standard conventional property management fees. This would hurt total income but improve NOI. I've always assumed giving free rent would only be necessary on larger buildings but if the numbers work, why not? Anyone have thoughts on this approach?

Thanks again!

I'm an investor from California looking at a 12-unit property in the midwest. Below is my analysis of the deal and I'd love your feedback!

The building is in good condition overall. Units are all 1 BR 1 BA and very dated. Rents currently around $500 per unit, but I think market rent for the units in their current condition is around $550. My plan would be to slowly increase rents to market rate and rehab units one by one as they turnover. After spending roughly $10,000 to rehab each unit, I think I could get $725 per unit.

Sale Price: $380,000

Seller Financing: Seller is asking for $100,000 down, 5.5% interest, amortized over 25 years, paid off in 10 years. Resulting mortgage payment for first 10 years would be about $1,715/mo. After 10 years, I would refinance.

Closing Costs: $11,400

Total Cash Outlay: $112,100

Current Rent: $6,000 ($500 per unit)

Market Rent: $6,600

Fully Rehabbed Rent: $8,400

Vacancy: 10%

Expenses:

Property Tax: $1,059 (17.6%)

Insurance: $458 (7.6%)

Property Management: $790 (13%)

CapEx/Repairs: $600 (10%)

Total Expenses: $2,907  (48%)

Current Rents:

• NOI: $2,493
• Cash Flow: $778/month
• Cash ROI: 8.33%
• Cap Rate: 7.6%

Market Rents:

• NOI: $35,450
• Cash Flow: $1,239/month
• Cash ROI: 13%
• Cap Rate: 9%

After Fully Rehabbed:

• NOI: $54,812
• Cash Flow: $2,853/month
• Cash ROI: 15%
• Cap Rate: 10.7%

It was a bit difficult to lay everything out accurately given the 3 scenarios, so I've attached screenshots of the spreadsheet I use displaying each scenario in more detail.

Thanks!

Current rents:

Market Rents:

After Full Rehab:

Hi Chris, yeah, I won't be letting go of that one for a while! Out of curiosity, where are you thinking of going out of state? I'm considering the same thing but have the common concerns around property management, familiarity with the area, boots on the ground, etc. However, I'm thinking if I can get a 100% rent ready property and find a really good property manager, it's doable. With our Stockton place under good management, I haven't been in the property for the past 3 years or so. Only drive-bys every once in a while (fingers crossed).

Hi all, old post, but figured I'd share my story. Purchased a triplex for 130k in a D neighborhood of Stockton, CA in 2012. At one time we had the Nortenos gang occupying one of the units, but we've since changed property managers and the property has been operating very smoothly since. We're cash flowing about $600/mo.

I'm now looking to buy #2 but am having a hard time find a place that will perform as well as the first. I've been considering Stockton, Sacramento, and out of state.