All Forum Posts by: Matt Vogt

It all boils down to what the comps are. Have you looked around to see what similar properties in the area are renting for? If the previous rent was 1000, I would think that you should be renting it for at least 1K/mo.  Definitely look on craigslist and zillow to see what others are renting their similar properties for.

I would think that it depends on what is more important to you, cash flow vs having cash on hand and what your risk tolerance is. The difference in cash flow is 250/mo whereas the difference in cash out is 56,075. With that, not including discount factors (inflation), it would take 224mo or nearly 20 years of straight payback to make up that extra cash of 56K. With a 96.5% loan though, you'll have virtually no equity in the property, and will face greater risks if/when the economic landscape changes. If you can use the 56K to re-invest, this may be a wise choice. If the cash will sit idle, you're better off pulling less out and keeping the equity. 

So 120 periods (10 years) at $85/mo = 10,200 in CAPEX reserves (at 10% as mentioned). Is this enough to cover your roof, water heater etc?

The alternative to just applying a basic percentage would be to build a 'bottom-up' budget of what your CAPEX expectations are, then back into how much you need to load for each month. Example, over 15 years you'll need 20K of CAPEX. 20,000/(15*12) = $111.11/ month.

There are a few areas that you need to analyze: Operating Revenues, Operating Costs, Repair (one-time) costs, and Financing options.

I would start by looking at the after-repair rental rates for both 2 and 1 bed units, multiply that out by your 10 (2 bed) and 10 (1 bed) units to get a total monthly revenue.

Then, figure out the cost of repair per type of unit (~10-15K/unit depending on finishes and extent of repairs necessary) 

Figure out the cost of repair for common areas (exterior, hallways, parking, main utilities, etc).

Use common metrics for operating costs (10% management fee, 10% repair, 10% vacancy etc, 10% capex, etc.)

Then figure out the NPV of the deal with both of the financing options to see what works better for you. It seems like they are essentially charging you 6% interest if you finance it... so if you would be doing a commercial loan, you would use that interest figure to compare against their rate.

Get him out of there asap.

I would like to see it as well! Thanks for sharing!

Hello all, 

How have you repaired foundation issues with cinder-block walls that are crumbling. I wish I took photos, but I didn't have the opportunity.

I looked at a property today that has a cinder-block wall construction. The floors are sloping, and upon crawling in the crawl space I noticed that one side of the wall was crumbling underneath. I would assume water issues over time caused this, so drainage would need to be done at some point. How do you go about repairing this? It's an 900 square foot house on a decent sized lot. It has a 1,000 square foot garage on the property as well. It's in a run-down part of Denver, but the entire market is going crazy and the price is right at around $150K. 

I haven't done foundation work, but figured it's worth the gamble on this property. 

The garage also has cinder block walls that are leaning/separating from each other... how do fix this type of issue? 

Thanks for the help

You would have to live in one of the units to qualify for FHA's, conventional owner occupied financing etc. So you'd end up evicting one of the tenants to allow you to do that, and I'm sure there would be some disclosure you would have to sign.

Keep in mind that mortgage fraud is a big deal, so I wouldn't just "live" in there and keep your apartment, I would actually move in.

Best of luck

Yeah, I attempted to contact owners a few times without success several years ago (without doing a large campaign - young, dumb, and very green). Just like sales, most of the time you're going to get no reply or negative responses... you're in it for the few occasional "maybe" or "Yes" responses... it's a number game, go after 1000, maybe get 40 responses. From those 40, maybe you get 5 deals... rinse and repeat. 

Good luck.

Sounds like you have some CAPEX coming up. Obviously if cash wasn't a concern you would just replace the roof and be good for 10 years (or whatever the life expectancy is). Considering that the repair is 33% of the replacement, I would replace the roof completely and be done with it until the next replacement interval.

As for the coil cleaning, how much is it? This would be a gamble, but probably the cost of maintenance will be a drop in the bucket in comparison to new AC units. I would get those serviced as well, hopefully giving you a few years.