All Forum Posts by: Layne R.

@Art Mimnaugh So, I know it’s been a couple days since you posted, but I took your advice and dug way deeper into the Lawton market. I called some owners of other properties I had been looking that and was able to get them to tell me what the rental market looks like there from an actual landlord there. And the verdict is not good, not good at all, they are experiencing high vacancy rates, low rents, couple that with the fact that apparently these guys got in during the last base upsizing, they bought the properties at a premium and now the base has experienced multiple drawdowns, it’s not uncommon for rents of $250 a month to be seen. Property values seem to have gone way down as I talked to a couple who straight up said that they are hoping to only take a 20% loss on total property value. Basically these guys are renting at whatever gets people in, while trying to sell. The particular property I was looking at rents for $300/month/room. And while the math technically still works, that’s only if your able to fill rooms. So my decision is, I’m gonna make an offer, after checking the property in person obviously, but it’s gonna be a crazy lowball, just to see if this is one of the guys willing to sell for anything to get out of it.  I’m thinking of coming in at like $40,000, perhaps lower after looking at it. Seems like anyone who could find out if this base is gonna upsize again before the masses do, could stand to make some good money. 

@Brad M. That's a great point, and one that I definitely forgot, thanks for catching that for me. This property in particular I now know has a master water meter, so I'd be on the hook for that, while all electric and gas are on separate meters, so it does change my numbers some, but not too drastically since it's water only. It definitely eliminated another property though. One that was looking to cash flow $180 per door, 4 doors, but it turns out that owner pays electric, water, sewer, trash, and HOA. That brought it down estimated cash flow substantially. I appreciate that, I didn't calculate that in on a single property I'm looking at, and it seems that on all them, the owner is on the hook for something on them, most still work, but one or two of them it definitely make it less profitable, and if there were any issues, I'd easily go in the red on them. Thanks for you help, if you think of any other advice, it's always greatly appreciated.

@Zeke Liston Good to know, I appreciate your thoughts on the vacancy rates, and they were similar to my own originally, I think the more I thought about it, the more it concerned me. That's a great idea as well, I've been planning on, I've just had a difficult time finding landlords in the area, I might have to be a little more active about finding some, no one from the area seems to be on BiggerPockets, as most of the local posts are from 2+ years ago. The area seems to be appreciating for SFH's more so than MFH's, it is rather slow though, since 2000 the average annual appreciation rate is 1.7%. Some of the MF have been on the market a while, one in particular that looks interesting as been listed for 242 days, is that long for a MF? I honestly don't know. The average of the ones I'm looking seems to be 175 days listed. As far as the mortgage, insurance, and taxes, that's exactly what I was thinking, I'm not opposed to moving to the area, and I'm lucky with my current financial situation, I could pay for that out of pocket if needed, not ideal, but it wouldn't burn me, I wouldn't lose it, or have to foreclose and honestly it wouldn't really hurt financially other than projected return. The only issue if vacancy were a huge problem might be selling it, but if needed I could always drop rents in the mean time to bridge the gap and get people in there to have something coming in while I get out from under it.

Definitely man, I appreciate all the help, it’s greatly appreciated, and after getting some feedback it’s still seeming like a good opportunity, so as of right now I’m planning on pulling the trigger on it, or one of them.

@Zeke Liston I’m in the Lawton, OK area, it doesn’t seem to need much, if any, but I’m not 100% sure yet. I was able to drive by and check out the exterior some, and I’ve seen pictures of the inside of some of the units and everything looks in order. I can’t personally see the interior until I have a prequalification letter, I guess the owner doesn’t want to disturb the tenants unless someone shows they are serious about buying. Average rent for the area I believe was $662, and the vacancy rate posted by the city is a pretty high 10.7%, but all 4 units are currently rented, and the numbers seem to run even at 16.6% vacancy rate. Obviously that’s not desirable but I think their are some ways to counteract that through proper management. I looked at Zillow Rental Listings and honestly it seems most of the current vacancies are pretty terrible quality, I think back when the military base was bigger people were able to get away with renting out in any condition simply because of the lack of supply, so the bad landlords let their properties get in bad shape, because they were able to rent them out anyway. Then when the draw down happened, people in the area were able to be a little pickier with their living situation. Also in another thread about the Lawton area, there were a few people who basically said they had been invested there, but pulled out because property managers or management companies were pretty much non-existent, I’m nearby the area, and willing to move to Lawton anyway if it would be beneficial to me. So I could manage the properties myself. To be honest I’m a little concerned because of the amount of investment type properties currently available in the area, there’s this 4plex, a 7 unit complex, a 6 unit complex, a 3 unit, a couple duplexes, and I believe another 4plex up for sale, seemingly all priced at points to easily cash flow if the listings are truthful, also l, all the listings seem to say that they are fully rented, but the amount of options makes me concerned the market is oversaturated, that’s the main reason I’m estimating such a high vacancy rate. So I guess, knowing that info, would the high vacancy rate concern you, even if the numbers still work at 16%? Does the amount of good quality MFH’s in the area, priced seemingly low, give an indication that the current market is worse than I’ve considered? 

Sorry for the essay, I always welcome any feedback, but completely understand if that’s too much info to respond to all points. I greatly appreciate any time you spend helping me out. 
 

As I’ve said, I’m brand new to actually making a deal, I’ve read some posts, listened to podcasts, and thought I had a good handle on running the numbers. But some of these properties seem to good to be true, and as the saying goes, then it probably is. So I’d just like some verification or criticism on my numbers. I know they might be high, trying to make sure I don’t underestimate, but that’s part of what makes it sound good.

Here’s one:

4plex, all units 1bed, 1bath, kitchen, Small living area.

List Price is 100k, I’d do 20k down, calculating 5% interest rate over 30 years.  Mortgage at $430, Taxes at $80, Insurance at $90. Variable expenses I went with 10% of rent for both maintenance and cap ex each, 8.3% vacancy. Rent could be from $2,000 - $3,000, so total estimated expenses become $1,166 - $1,449. That leaves cash flow at anywhere from $834 - $1,551. Depending on specifics. I’ve read that the market can have high vacancy rates, so I doubled it and still came out with $668 - $1,302 cash flow per month. Is this a good deal? Did I run my numbers correctly? Forgetting something? I appreciate any advice, thoughts, or comments. 

Note: I haven't bought a single property yet, so take this for what it's worth. It seems from other threads I've read that high vacancy rates seem to be a real issue. I've been calculating at 8.3%, which is a one month vacancy every year, and there seem to be a lot of properties that should cash flow MF homes specifically. I've even done some of the properties at a 16.6% vacancy, 10% CapEx, and 10% maintenance, along with Zillow's estimates of fixed expenses and a few still seem to work, and some work very well, on paper at least. One thing that may be worth considering is shorter term leases to attract these army guys that may or may not be stationed there for a full year. I've known a few service members, not in the Lawton area however, and the consensus seems to be that they would have been more attracted to shorter leases so if they get deployed or restationed they're not on the hook for a year lease. Any thoughts here? Anyone already in the market have experience with these issues and found a solution that works?