All Forum Posts by: Bobby Narinov

:)

there is no boasting here. I don't have "amazing negotiation skills". What I am trying to show you is that everyone can do it.

And if you we paying more attention to the conversation, you'll notice that I only mentioned it after @Brian L. tried to prove that the realtors can save you money. 

A realtor has a conflict of interest since he is getting paid more if the house you are buying is costing you more. So they can only save you some small amount but nothing as big as in my example.

The property was in excellent move in conditions. Near K-to-5 school. Probably too near - the third house from the school. I got it for my personal usage. As I said the property was ~200sqft larger than the rest of the track houses because it had a had a huge permitted loft (~200sq.ft) with a standard size closet (if needed the loft can be a 6th room).

It was slightly overpriced when they first placed it on the MLS so it got a bad rap. After 3 months they fired the original listing agent and hired a new one. The owner was a relocation company so I knew I can make a business proposition to them. I presented my initial offer with pretty much no contingencies (I had a pre-approval by 3 different lenders) and promised a quick 30 day close. I also wrote a $20k check to show that I am serious. I offered $755k, they asked me to raise it so I did: $760 and they accepted it. It is easy to deal with companies because they have no emotional attachment to the property they are selling.

Why would you like to bypass the seller's agent? Go talk with him and ask him to represent you. He would love to get your commission as well. He should be able to assist you with your negotiation.

What are you trying to achieve that the agent will not allow you to do?

Keep in mind that you cannot avoid paying him his seller's commission. The owner have signed an exclusive representation agreement so the agent gets his 3% commission when the house is sold.

Is that the average rent for the area or this includes some discount for renting fast? From landlord standpoint it is best to offer yours at a small discount ($50) and rent faster, than lose a month (or more) waiting to get renters. Even if the area is in high demand, the problem is that you have a competition and what matters is where the competition stands, not how great you are.

There is an old joke about two hunters been chased by a bear. One of them stops to tighten up his shoe laces. His friends says, "What are you doing? A bear can outrun a horse. You can't outrun a bear!". His friend replies, "I don't have to outrun the bear; I only have to outrun you!".

In a brand new area there is very little you can offer that the competition does not offer. So if you are not ahead of the competition it is a game of chance. You cannot take chances because you have 4 empty houses. To attract all potential tenants you have to offer lower price.

Keep in mind that winter is the slowest time for getting any rentals. This is why, the apartment complexes lower their rents and offer all kind of incentives during this time because they  know that one month of empty apartment at  $1,625/month is equivalent to renting for 12 months at $1490. So dropping the price by $50 and renting it a month earlier is going to save you a lot in the long run.

I would very much like to know how long it took you to get all of them rented. Please keep us posted.

I think you are not calculating your NOI correctly. I am assuming you are financing $152k at 4.5% which is about $1,050.00/month, $400/month ~2% Taxes (I don't know what are the taxes in SC, ive heard they are 4%. If so, double that - use $800), insurance $80. This leave you with $1,530/month with expenses. Assuming you don't have any problems with them (because they are new, but they always do) and you don't have any vacancies (you always do) and your ability to get the asking rent (you probably would not), you are making about $70/month.

Now, let's be realistic: 12%(one month) for vacancies, 10% for repairs and $50 less rent per month to attract renters fast (this builder probably sold a lot of homes to other investors) you are having the following expenses: $1,871.00 = $186(12% of 1550) + $155 (10%) + $1,530. NOI = NEGATIVE $321.00. I'm assuming you are going to manage them yourself.

And to make the matters worse, here is how the bank sees your income:

RENT = 75% of 1550 = $1,162.50

expenses = $1,685 = $1530 + 155.

NOI = NEGATIVE $522.5 - per property.
With one property as primary residence and 4 rental your monthly expenses are: $3,775 = $1,685+ 4*$522.5

To qualify for your 6th property (assuming you have no other credit expenses) you'll have to make over $9,207.00/month (or over $110.5k/year). $3,775 = 41% of $9,207. In addition you will have to have as reserves 6 months of expenses which comes to about  $50,550.00 = 5 properties *$1,685 * 6 months.

Actually with this calculation you cannot buy another property. I forgot to include the purchasing price and servicing the loan on the new property. Lets redo it for the same exact property as those 5: expenses = $4,297.50/month. Income $10,481/month($125.8k/year). reserves: $60,660.00 = 6 properties * $1,685 * 6 months.

I didn't calculate your return on investment because you have none. As they say, the money in real estate are made when you purchase the property but you realize it when you sell.

A lot of people get swindled by unscrupulous builders into thinking they got a great investment when in reality they don't. For $249k you could have gotten this fourplex: 2636 Fassitt Rd, North Charleston, SC 29406 that isn't even a great deal but brings about $2,200/month which is about $5,975.00 more than what you have now.   

I suspect everyone buying an apartment complex uses some list that they check against when they inspect the individual units. Can you share yours here?

I suspect you have a different checklist for each room:

• Kitchen
• Living Room
• Common Bathroom
• Master Bedroom
• Master Bedroom Bath
• Master Bedroom Restroom
• Master Bedroom Walkin Closet
• Bedroom 2
• Bedroom 2 Bath/Restroom/walkin closet, etc.
• Bedroom N, etc.
• Balcony
• Patio
• Window/central AC/heater and temperature controls
• Boiler/water-heater
• fuse box

What are you paying special attention to, especially when the units are occupied? 

Do you take pictures? Are you allowed to do so? 

I think this calculation is a bit optimistic. Multi-families are evaluated based on their CURRENT cap rate (not on their future potential). So the calculation should be:

24 * 0.60(60% occupied) * $495 month X 12 = $85, 536 gross

$85, 536 x 0.35 (65% = 60% multifamily expenses + 5% for utilities/water) = $29,937.60 at 10 CAP is $299,376.00

$299,376 - 10 units * $2,000 (for repairs) = $279,376.

So the bank is only overpriced by only  $570,000.00 or 67%.

I am not even sure a property in disarray can keep their CAP rate. Often when fixed and stabilised the cap rate goes down from 10 to 9 or even 8 so a CAP 10 when fixed may require purchasing at CAP11 which can drop the purchase price to $252k.

The security deposit is the most contentious problem because the person that leaves have to pretty much give it up. I cannot tell them how much of it I am going to return before i fixup the property for the next tenant. But I cannot fix it up until they leave. they may trash the place before that.

So I let them figure out what to do about it but I am not returning the security deposit until all of them vacate the property and have my crew go over every little detail and gives me a repair estimate.

After you get a judgement against her you may find a credit reporting agency to report the money she owes you to her credit report. An eviction alone is not reported to the credit bureaus so running a Credit check is not going to show anything.  

Check with the buyer. Some unsophisticated buyers(i.e. bad realtor's prey) sign an exclusive representation agreement with their buyer's agent which forces them to give him 3% of the purchasing price whether he showed them the home or not. In that case, if you don't agree to his blackmail the buyer may have to come up with his comission themselves.

On the other hand you don't have to give this particular agent any commission since he did not bring you the client. Your house is not even on the MLS so he cannot claim that he knew about it.

But if you decide to post it there(on the MLS), I would recommend giving the buyer's agent a full commission otherwise they'll refuse to bring buyers to your place thus lowering your pool of people to sell to.