All Forum Posts by: Marcel Pean

@Rick S. This is great! I was looking on the site for something like this. Thanks to everyone else also! This gives me a much better understanding of estimating expenses and analyzing potential deals. FYI, a property management I spoke with here in DC says they charge 8% of monthly rent. 

Thanks @Tyler Ansell. That's good to know. I'll call a local property manager to see what they charge per month for their services. 

When estimating expenses for a small multi family property (2-4 units), I understand that some expenses can be found just by asking utility companies, property managers and other investors. However, is there $ amount or a % amount that you use to estimate vacancy, cap ex and property management (assuming you are managing the property yourself)? And does it vary based on your market? What is a good estimate amount to use?

Thanks in advance!

@Randall Williams Thanks for the feedback!

To the investor that buys and holds (or BRRRs) small multi-family properties (duplex, triplex, 4-plex), especially in expensive markets, if you are starting out; What kind of return on investment you hope to make? What methods do you use to find deals - Direct mail, MLS, word of mouth, etc? Are those type of properties analyzed and evaulated the same way as SFH?

Any feedback is appreciated in advance!

@Ray Agosto If you are going to do direct mail, make sure you have a budget in place to maintain a campaign for at least 6 mailings. Most people may not respond to you until the 6th or 7th time. If you are sending out a lot of cards (1,500+) then maybe sooner but make sure you can maintain this for at least 6 mailings! You can buy a list from List Source and filter your criteria (i.e. absentee owner) but there are other lists online. Check Google. As for a script, there might be some on this site but I found mine at a local REIA meet up. Best of luck!

@Zane Bradshaw No, I think it's the other way around. More expensive properties will be on the higher side because the spread is larger. Like @Russell Brazil said above, would you rather have 10% of 100k or 20% of 30k in profit? But what I don't know is the minimum acceptable profit a rehabber expects to make? Should I still calculate purchase price using the formula but with a higher % or is it better to subtract all repair expenses from projected ARV?

@Zane Bradshaw Great questions! No need to apologize for wanting to learn. The formula is used to determine your Max Allowable Offer or MAO to the seller. Most investers want to buy a property for 70% of the After Repair Value or ARV so they can get at profit . You make money when you buy. In my original post I was trying to calculate how much to offer to a home owner to buy their house. I determined the ARV by comparing similar houses in the area that have sold within the last 6 months. Similar in size, bedrooms, bathrooms, street and any other unique features. Because I live in an expensive market, the formula doesn't quite apply to me. This formula is more of a base line and the percentage can range between 60% - 80% depending on the market and the condition of the property.

Hope this helps! Keep asking questions!

Also, @Russell Brazil The property is in Petworth. Good guess! Thanks for your feedback, I think I'm starting to get it now :) 

@Russell Brazil Thanks for the feedback! I see that you are in the DMV also so you can attest to home prices here. 

Could you please clarify what you mean by "convert it to actual dollar amounts and ignore the formulas?"  I know the formula is a guide/base line but when you have ARVs hovering around the million dollar range, is there a rule of thumb or a percentage amount increase to determine purchase price?

@Carolina E. Thanks for the feedback! I understand that that formula is a base line and you can between 60% - 80% depending on the property. But even with those adjustments the purchase price was still pretty high! What makes this particular property special is that it is in DC, which is a very expensive market by the way, and it has high end finish such as custom cabinets, marble counter top & hardwood floors throughout. This is the level of how most homes are being rehabbed. Maybe this is why the rehabber paid what he did...