All Forum Posts by: Matthew Von Dwingelo

 Yep what’s the cap rate they use?

500sqft for 2 bedroom seem very tiny. Also 40K for 500 sqft renovation seems very high. Can it actully rent for 1200 in the future? 

@Matthew Von Dwingelo, I don't operate in the commercial space, but just curious, where is this deal specifically located? I would double-check and verify rental rates.  

Congrats Matthew on going under contract! There's some solid math above and insightful assumptions/questions. Agreed that 40k p/door is 'extremely high'. I would also question a 700$ rent bump for 500sqft. In your words: The other 13 are rented for >>ABOUT<< $500/unit.

 I'm not sure that even the most illustrious parts of the A would absorb such an increase. Manhattan New York,  maybe...Atl, not so much. 

U/W the deal with a comparable 500sqft rent. I think that'll help you answer the "Is this a good deal" question. 

Best Regards

40k per door reno is extremely high for 500 sqft units.

What's the estimated NOI?

If financing, what's your interest rate? Using Greg's figures above and 25% down payment, 25 year amortization, and 7% interest rate, the mortgage payment would be above the NOI and the property would be cash flow negative.

Do you have a projected NOI? Debt quote? There isn't enough here to really say, but a SWAG would look like this...

Assuming a 50% expense ratio and a 10% economic vacancy factor, your NOI would be 1,200x12x14x90%x50% = $90,720.

I also have to assume a Cap Rate. This is another total SWAG, let's use 5.5.  This would mean that your stabilized value would be $90,720 / .055 or $1,649,454.  Given your "all in" cost of $1,660,000, you basically aren't getting paid anything for your efforts. 

On the other hand, I've made several massive assumptions, any one of which, if corrected, could dramatically change the outcome.  There is a 50/50 chance the deal gets much better or much worse.  You can always renegotiate with the seller if the deal doesn't look like a winner.

My one recommendation would be to get some help underwriting this deal properly so that you know if you are creating value or wasting time.

Good luck.

@Matthew Von Dwingelo

I have seen some wholesalers. That i consider newbies based on how they present the deal to fb or investors.

They get a mls listed property or off mkt under contract for 10 to 20k less than asking. Then show arv of nearby homes that are way newer builds. Only thing similar is # of br or baths. An end use buyer would not compare a 1950s to 2000s build house as same even though they both have same # of br and baths.

The repair cost and arv are not realistic because they a new or dont know or have not done a rehab.

So i would say details of rehab. Photos. And true comps would make marketing the deal to investors faster and easier to make decision.

 Don't use comps from when the market was red hot. 

- They do most the heavy lifting with the seller

- They usually don't have good deals 

- Being accurate with their rehab and ARV numbers