All Forum Posts by: Larry H.

What costs factor into the Net Operating Income equation?  Do I factor in ALL expenses associated to the property such as my maintenance and turnover costs into it, or is it strictly the recurring monthly operating expenses such property tax, insurance, utilities, pest control, and lawn care?  

I use 10% maintenance, 10% cap ex, 10% vacancy/turnover, 5% mgmt. if someone else is managing your property 10% is pretty standard. We manage our own properties from out of state. My father in law is a contractor where are properties are located so I factor the 5% in for paying him to run out and do minor fixes. Our properties are also old and will need significant repairs some time in the near future. We are trying to buy a couple more now that need rehab. If we are able to get them and rehab them I won't put 10% aside for maintenance and cap ex on them. Maybe 7-8%.

This deal didn't happen. The seller got an estimate of $35,000, which is only $10,000 less than my estimate. His estimate was solely based on the pictures I provided him from the inspection (which did not include everything.) I intentionally didn't give him the whole inspection report because I paid $600 for the inspection and I wasn't going to give him a report for free telling him everything that was wrong. I also estimated for unknowns because there are several water leaks throughout the property. Nonetheless, after his estimate he came off his original asking price $18,000, which would have put it only $18,000 below the comps in the area. I said no thanks and he chose to end negotiations. Moving on, I just put an offer on 3 more properties. Like someone recently told me, it's easier for me to find another property than it is for him to find another buyer.

Thanks for all of the info.  @Mark Freeman, that's what we thought too.  The fact that he didn't immediately reject our offer was a good thing in our eyes.  And like I told the agent, somebody is going to HAVE to do these repairs.  They are not repairs that can  be put off.  So whether he does them, we do them, or someone else, they have to be done. 

We are primarily buy and hold investors in multi family properties, but since the flooding in the Baton Rouge area I have been presented with multiple houses that people want out of and the prices are irresistible. Has anyone flipped a flooded house or currently flipping one? The particular one I am going to pull the trigger on got 4 feet of water and I'm told it is already gutted. How much have were the costs to rehab using "flip quality" materials and appliances? By that I mean nice looking stuff but maybe GE appliances and cheap granite, laminate floors, etc

I am not relying on the seller to do the leg work. I had an inspection done and consulted a contractor to get an estimate for the repair costs. I provided the seller with photos and descriptions of the problems the inspection revealed.  I padded the repair costs a little because some of the repairs have water damage that won't truly be revealed until we start ripping sheet rock out, but I was not unreasonable. 

He can get his own estimate but the truth is our motivation is different. He will want to band aid whatever he can to pass the problems on to someone else. I want to fix the problems the right way up front and not have to worry constantly having issues, so my costs will be higher than his. So I am not lying or deceiving him. Like I said, I provided proof of the repairs that need to be done. 

As far as the agent, he is the reason I have the deal in the first place. He reached out to my father in law asking if he knew anyone that wanted to buy an off market property. I realize the conflict but I think it would be a jerk thing to do to cut his small commission in half. 

We have been under contract on a 4 plex for a couple months. After inspection I submitted a revised purchase offer that was $45,000 less than our original agreement. The agent is representing both of us. The agent tells me the seller is motivated to sell the property and had no idea the condition it is in (he's out of state), but after two weeks of submitting the new offer the seller has neither accepted nor rejected our new offer. The agent told me he's waiting for a contractor to give him a bid for repairs so he can verify what I'm saying it needs and what it's going to cost. The property is in Baton Rouge and the surrounding areas were majorly flooded a few weeks ago, so contractors are overwhelmed right now with flood repairs (this property did not flood). Should I make other offers on other properties while still waiting for this guy to respond or wait until this deal is finalized, go or no go? We only have the cash to close one deal right now so if we move on and get another property and then this guy decides to accept our offer how would that work. We have no deposit on this deal, but I have spent $600 on an inspection. This will be a good deal if its a go.

Local bank.  5.38% variable loan amortized over 25 years.  We buy the property, partner pays for repairs. 

I am under contract on a 4 plex. Inspection revealed about $40,000-$50,000 worth of work that needs to be done. I am currently waiting on the seller to accept or reject my new purchase price offer, however, I don't have that much cash to rehab the property. My father in law is a contractor and said he would be willing to do the rehab for a percentage of the equity/cash flow. Based on what I figure we would be at about a 55%/45% split. Anyone have experience with this type of deal? Any particulars I should be aware of? Do I let the bank know of the partnership for purpose of rehab, or keep it quiet? I think it will appraise for what I need it to without the rehab, so I'm thinking I won't need to show proof of funds for the repairs. My FIL currently cuts the grass at our other properties and we pay him. If we are partners on this deal should he not get paid to cut the grass at this property since he will be an equity partner? I have not talked to an attorney but I plan to use one to have a contract drawn up. If anyone can recommend an attorney in Baton Rouge for this id appreciate it. ARV is around $140,000 Proposed purchase price is $70,000 Expected rehab is around $50,000 Total gross rent is $2400/ month

@Amy Verges, I am also interested in getting an insurance quote for 2 identical four plexes on the same street.