All Forum Posts by: Mark Devereaux

Ok, you guys tell me if this will work and what else I should be thinking about.

The project is to purhcase and remodel/repair 2- 4 unit apartment buildings. Currently bank owned and vacant. One building is condemned by the city. For some reason they a listed by seperate agents even though they are on the same lot. I have access to a 6-8 month hard money loan so we can offer cash and closing within a matter of days. The plan is to get the property rent ready within 6 months from posession date.

There are 7- 2 br and 1- 1 br. $450/mo is on the low to mid- range for 2 br and $375 is low to mid for a 1 br in this area.

Here's the projected budget I have constructed:

Annual Net Rent: 39,307
50% Expense Rule: 19,654
NOI: 19,654

Cap Rate 10%
After Repair Value: 196,000

Repair/Improvements: (85,000)
Current Value: 111,000

Offer Price: 100,000 cash to close w/in 3 days

Total Hard Money Investment/Loan: $185,000 (purch + repair)

The terms I have worked out are to repay the hard money within 6 months by placing a new mortgage on the property with an agreed purchase price of $203,000. My wife and I plan on holding and running the property for at least 5 years and getting the rent up to market value.

What do you guys think? Suggestions/ideas?

Thanks
Mark

Ladies and Gents,

Here's the details. I'd like your opinions/suggestions.

List price $440,000

16- 1 br units; one building; upper and lower units
1 vacant
On site leased laundry (2 machines)
Landlord pays water and gas
Tenants pay electric

Revenue per unit(stated):
11 @ 415
1 @ 440
2 @ 430
1 @420
1 @ 410
Laundry $1100/yr
Total Rev $81,320/yr

Expenses (stated):
Gas/electric $8626/yr
Water $4300/yr
Taxes $8000/yr
Ins $3000/yr
Yard Maint $1490/yr
Trash $804/yr
Total Expenses (stated): $26,220/yr (well below the 50% rule)

Tax information: last transfer 1999; 54.2663 mills for non-owner occ.; current SEV $162,400; taxable value current $145122

From the listing agent: Nice old lady has owned them for 30 years; built in '70's; currently has one vacancy; all units are 1 yr lease; half of tenants have been there for a very long time (years); other 8 units turn about 1x/yr; great neighborhood; upscale community; walking distance to downtown; roof is 4 years old; hot water heat (LL pays); "A" property

Have not seen the inside yet, from the pictures I've seen the kitchen/bathrooms are outdated. From my drive-by it looks like the "worst property on a good block"; not in disrepair just a little unkept; ugly mailboxes, dirty siding; leaves not picked up; no sign, very little landscaping.

According to local banks, cap rates on deals are 8.5% on the low side to 10.5% in the mid-high side.

What would you guys offer? Assuming 20% down (worst case) or less. Suggestions? I'm looking to hold onto the property for at least 5 years.

:beer: :beer:

Will do Guru!

Mark

The administrator guru suggested I introduce myself here. I'm 37 years old with a beautiful wife and a son Trent, 5 and daughter Ava, 18 months. I'm the VP/CFO/jack of all trades, master of none for our family owned Anheuser-Busch, Diageo, Heineken and Gallo wines distributorship in Owosso, MI.

Bought a house a few years back, made $40K on it, and built my dream home on 30 acres with 1/4 mile of river frontage. In the meantime we bought another rental house and have had that for five years.

I joined biggerpockets as another resource to try to gain some knowledge and other opinions about real estate investing in general, but more specifically small multi-family housing units (10-30).

We've just decided that my 401k is not cutting and it's not as fun as investing in real estate. My wife is ready for a career change, so we want to get into smaller (10-30 units) multi-family housing.

I'm working on my first deal right now. I'm comfortable running the numbers, profitability and cash flow and all that (that's what I do for our company). The biggest thing I need help on is finding a good agent in my area and the in's and out's of multi-unit financing. My little locals banks I deal with everyday aren't so eager.

Our market is not HOT. We're looking for solid, long-term investments. I'm not looking to flip. Just slow, steady growth. Our goal is 100 units in 10 years.

Thanks for reading. Keep up the good work.
Mark

I'm new to this site, first post.

I'm looking for opinions on a deal I have just began to pursue.

24 unit
12- 1 BR
12- 2 BR
6- 4 unit buildings
Tennants pay heat/elec
Landlord water/sewer
3.25 acres
asking $720,000 or $30,000 per unit

Smaller mid-Michigan town near expressway

Some updates have been done, for the most part apartments are worn. Landscaping and curb appeal are poor to marginal at best. Colonial looking, with brick on front and aluminum siding all around. Built in late 60's, early 70's. Window A/C units.

FSBO, an attorney who is stretched "too thin". On first call, owner stated he gets $425 per month for 1 BR and $525 for 2 BR. He also stated they used to be 100% rented, now he has 4 empty. I tried finding leasing info in the local newpaper, phone book and internet and couldn't even find any information. My initial feeling is that these are poorly managed and marketed. I'm not going to get rich flipping them, but should produce a steady cash flow in the years to come.

I called him back a few days later, asked him if he would/could provide some numbers to back up what he said because I was going to begin raising money. He sent me his tax return with the following information:

Gross Rents: 104,717

Advertising: 754
Cleaning & Maint: 7,627
Insurance: 5,364
Legal fees: 558
Interest: 7,548
Repairs: 9,907
Taxes: 15,350
Utilities: 2,133
Depr: 11,849
Other Fees: 1,117
Garbage: 916
Water/Sewer: 10,266

Total Expenses: 73,349

add back in Depr. and Interest and you get a NOI of about $54,000.

As you can see, it looks like he either over-stated the amount of rent per month or under-stated his vacancy rate.

I have a lot of questions, but I'm looking for feedback on what the economic value of the property is.

Would it be an insult to offer 15% below asking price? You don't buy "potential income", you buy existing income and cash flow, right? I have money for 20% down, but have not yet pursued financing.

Owner stated he has existing bal due on a land contract, he's showing paying $7,500 in interest. What does that mean?

As I said, this guy is selling them himself. I would like to enlist the help of an experienced real estate agent. What's the price on that in Michigan for multi-family deals?

I intend on buying and holding and improving the worn apartments over time as they turn over. I'm CFO for my family owned beer distribution company and me and my wife are looking to get 3 buildings within the next 10 years. We currently have a couple single-family.

Any feedback on what to do, or especially what NOT to do would be appreciated. Keep up the good work!
Mark