All Forum Posts by: Marshall Zakarian

@Account Closed I'll be receiving the P&L this week to figure out what the real deal is. I had better hope for this one but at 5% cap I'm better off with S&P500 haha.

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Oren,

I'm currently waiting for the P&L from the owner. Once received I will provide more information. Thank you again.

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Originally posted by @Avi Garg:

@Marshall Zakarian your purchase price should be based on current numbers instead of after repairs and purchase. With that said, 74700 yearly revenue and 50% expenses is typical (tax, insurance, vacancy, property management, utilities, repair, capex etc). Your NOI will be 37350. You want to spend $600-$700k for this? Or unless it's a very hot market

Avi,

this property is in a very hot market with high demands for multi-family. My goal was to purchase it, remodel it, increase rent appropriately, stabilize it and then sell it in about 15-24 months.

A NOI of $37.500 would not be worth my time at all.

Does this forum allow me to upload the current financial statements?

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Originally posted by @Robert Herrera:

@@Marshall Zakarian This depends on what you need for cashflow compared to what you have to put down. You are putting down $100K+ and receiving around $1,640/month. You could do the same thing with single family homes in the area I invest for cheaper. I buy SFH for around 50K. that's about $15,000 down with closing costs. Mortgage is about $350/month PITI. Rent for around $950/month. That's $600/month cash flow, Sometimes $500/month depending on the house, etc. As you can see, you would only need 3 of these houses to make the same cashflow. That's about $45K out of pocket.

Not only that, but i use lease Options and the tenants give me about $7,500 to move in. There by giving me back half of my cash Immediately. After buying 3 houses, you will have $22,500. That's enough for 1 house at $15,000 and remander of $7,500. Get the option payment from that new house, and you will have $15,000 on hand. Buy another house. Get that option payment. Now you will have $7,500 on hand for backup money. You will also have 5 houses that make about $2,500/month-$3,000/month, all starting with $45K. Oh yeah, you also have about $100k left over from not doing the other deal...

Robert, I appreciate the answer but with my current employment I don't see how I'd be capable of doing this and having the time to follow up with it but I like the idea. Only way I'd make this work is if I become a silent partner or just capital partner lol.

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Originally posted by @Oren K.:

Not clear if you are including the roof & boiler in the remodeling / capex plan but lets assume you are. Also if the boiler has not been upgraded in 35 years, there are probably other things that need to be done (e.g. windows, sewer connection, drain stacks, etc.).

Lets say you are spot on with your estimate including everything; The bottom line is that you will be all in for ~$700,000 ($600,000 purchase & $100,000 remodeling) and expect to have a Potential Gross Income of $108,000 per year ($1,000 x 9 x 12). Ignoring the currents owners numbers, which I don't believe anyway (~30% expenses!!!), and using 50% for expenses, would leave you with a NOI of ~$54,000 which translates to ~7.7 CAP (54,000 / 700,000) once the work is done and all the tenants are turned over (at least a year?).

A couple of caveats;

1) As this is an older property, it would not surprise me if the expense ratio was higher

2) Carrying cost are not included

3) Unless you have done this a few times before, renovation costs tend to inflate

4) Your time / effort is also not included.

So my question to you is would you be satisfied with a 7.7 CAP? Can you generate this return with less effort / work? How confident are you in your assumptions / projections?

Good luck,

Oren

Oren thank you for this and no I would not be satisfied with a 7.7 CAP at all.

Few questions for you. Tenants are paying all of the utilities except for water which is $1,920/year and the annually tax on this property is $12,500 which was included in the owners expense.

I don't believe I should cut my net amount in half. I'm not really sure why I would do that.

If I was to increase rent to $1,000 in the future once everything is done that bring my gross income to $108,000.

108,000-12,500( taxes)- 2,000(water)- 10,000( repairs and etc)= $83,500NET.

Doesn't that bring my cap to 13.92 or am i missing something?

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Originally posted by @Joseph Gozlan:

@Marshall Zakarian your net seems a bit too low for the revenue. Are you basing this on actuals?

Even if you intend to manage it yourself you have to calculate PM fees. The next guy probably will as well when he comes to buy yours.

Based on the revenue you stated and the 50% rule (until proven otherwise) at 600K it's an actual 6.25% cap rate and proforma (assuming you can really get $1000) it's a 9% cap rate.

I'd be very careful with building your underwriting model.

Joseph,

$55,000 is the actual net that is with the current owner. The property is not being management properly and needs to be remodeled. $1,000/unit is the rent that I would charge once the rehab is done.

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I've been proposed a Class B multifamily building in a desirable area with low inventory. Below are the numbers.

9 Units( all one bedrooms ) ( 625sqft )

2 units= $880, 2 units= $800, 2 units= $725, 1 unit= $845, 1 unit= $670, 1 unit= $625.

Revenue: $74,700

Net: $ 55,000

There is no property management. Roof is 20 years old and furnace is about 35 years old.

Currently the rent is under average market rent. There is a few listings currently right now that are 500sqft for $925 in a less desirable street.

I'm pretty certain that I can get $1,000/month after I remodel the bathrooms, change the floors to hardwood, remodel the kitchens and new paint. This would total roughly about $100,000.

The seller first wanted $800,000 and after a month he called me said he will take $700,000.

The seller is motivated to sell and I'm pretty certain I can grab it for $600,000.

What do you guys think?? THANKS FOR THE FEEDBACK!

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I've been proposed a Class B multifamily building in a desirable area with low inventory. Below are the numbers.

9 Units( all one bedrooms ) ( 625sqft )

2 units= $880, 2 units= $800, 2 units= $725, 1 unit= $845, 1 unit= $670, 1 unit= $625.

Revenue: $74,700

Net: $ 55,000

There is no property management. Roof is 20 years old and furnace is about 35 years old.

Currently the rent is under average market rent. There is a few listings currently right now that are 500sqft for $925 in a less desirable street.

I'm pretty certain that I can get $1,000/month after I remodel the bathrooms, change the floors to hardwood, remodel the kitchens and new paint. This would total roughly about $100,000.

The seller first wanted $800,000 and after a month he called me said he will take $700,000.

The seller is motivated to sell and I'm pretty certain I can grab it for $600,000.

What do you guys think?? THANKS FOR THE FEEDBACK!

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Originally posted by @Haseeb Awan:

@Marshall Zakarian - I think the price is high as compared to other opportunities specially if you are putting this much of cash upfront. If you get good financing options then may be. Have you looked at the sale history of the property ?

Yes, Seller purchased it in 2009 for $250,000 and has invested about $40,000 in renovations.

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All Forum Posts by: Marshall Zakarian

Marshall Zakarian has started 5 posts and replied 19 times.

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: Need Help Knowing If This Is A Good Purchase? ( MULTIFAMILY)

Post: What's your opinion on this 7 unit Multifamily ( multi-family)?