All Forum Posts by: Matt B.

Hi All - I am looking to make an offer on a two unit town home. Both units are rented out with long term tenants in place. Below is a screenshot of the model results but see below for a break out of the assumptions:

• Purchase price = List price (room for negotiation)
• Closing Costs = Estimate from lender
• Down Payment = requirement from lender @ 25%
• Interest rate = rate offered on a two unit rental from lender
• Total rents/Month = current rents in place (room to raise based on market)
• Property taxes, Insurance, Water/Sewer, Trash removal = all reflect actual amounts paid by current owner
• Vacancy rate = 10% of gross rent
• Cap Ex = 5% of gross rent
• Maintenance & Repairs = 5% of gross rent
• Monthly free cash flow = $155
• Total ROI = 7.14%

My question is simple, do you think this is a good deal? Is this a deal you would accept in todays market?

I will offer less than the $200K its advertised for, trying to get it for $190K, which will improve the free cash flow and ROI slightly. The model below more accurately reflects a worse case scenario rather than the full potential of the property, as rents can be increased (need to see current lease in place to know by how much and when), and purchase price can be lower.

Let me know your thoughts!

Hi All - I am looking to make an offer on a two unit town home. Both units are rented out with long term tenants in place. Below is a screenshot of the model results but see below for a break out of the assumptions:

• Purchase price = List price (room for negotiation)
• Closing Costs = Estimate from lender
• Down Payment = requirement from lender @ 25%
• Interest rate = rate offered on a two unit rental from lender 
• Total rents/Month = current rents in place (room to raise based on market) 
• Property taxes, Insurance, Water/Sewer, Trash removal = all reflect actual amounts paid by current owner
• Vacancy rate = 10% of gross rent  
• Cap Ex = 5% of gross rent
• Maintenance & Repairs = 5% of gross rent
• Monthly free cash flow = $155
• Total ROI = 7.14%

My question is simple, do you think this is a good deal? Is this a deal you would accept in todays market? 

I will offer less than the $200K its advertised for, trying to get it for $190K, which will improve the free cash flow and ROI slightly. The model below more accurately reflects a worse case scenario rather than the full potential of the property, as rents can be increased (need to see current lease in place to know by how much and when), and purchase price can be lower.

Let me know your thoughts! 

@Yuki K.

I do not factor appreciation into any deals. Appreciation is not almost certain, so many factors could change it and you'll be stuck with a negative cash flow property and potentially underwater. If you base your analysis on the items you know are certain and in your control (i.e. taxes, rent etc.) then most events that could sink you won't hurt much.

I know that real estate plays in places like the bay area and NYC are their own animals, you should try best to limit your risk. For example, I had a property in NYC that was cash flow negative $100 a month, but profited over $100k in appreciation in just 4 years. However, -$1,700 per month is excessive risk IMHO.

Best of luck in your decision!

Coming from NYC, I can say things are done a little different here in PA, but not regarding fees. In NYC agents really just help you find a property and the attorneys take over. Out here in PA, people don't use attorneys as much (I did, and always recommend) and the RE agents earn their commission by handling the paperwork at closing and are really the person you mostly deal with. With that said, I have noticed zero difference in the fees (in terms of percentages, $ amounts are way higher in NYC). Having purchased properties in both NYC and PA, as a buyer I have not paid a fee to an agent for any property.

I live in Bethlehem, love it here, but yes the market is crazy hot here as well.

@Christina R. I would make sure your in compliance with NYC laws regarding being an AirBNB host in the 5 boroughs. They have been cracking down on that lately and the fines can be very very costly. 

https://www.nytimes.com/2017/04/07/realestate/how-...

@Max T. by "partner" are you referring to a financial partner or like a spouse? I only ask because if they are a financial partner you are taking all the risk i.e. acquisition loan in your name and renovation costs coming out of your pocket. there is nothing holding your financial partner into this deal and they are not facing any risk. If you mean partner like a spouse well thats married life for ya lol jk. but seriously if they are some sort of financial partner who has no skin in the game id be worried right about now.  

@William Davis I only get out of bed in the morning for trillion dollar deals...

@Jason Urso Everything is is going great. I still have the tenants and they are great tenants. Never had a problem. Every time I go there the place is neat, clean and organized. No smells or damages. I really lucked out with them.  

@John Spina jr I havent looked into NJ recently so I cant really say but I think in general RE taxes tend to be higher in NJ than in NY, but I have heard that you can find some properties with low taxes. My area of focus is in PA. My wife and I want to move there in the next few years so ideally id like to get a few properties there now and they become local investments once we move there. I was supposed to see two properties in PA last weekend but the seller decided to take the house off the market and the other one had some tax issues so i didnt get to see them. The only investment property I have is in SI but I'm actively looking in PA for my second one.