All Forum Posts by: Michael Chilton

@Matthew Hollister what are taxes on those properties?

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Marshalltown.

Purchase price: $53,000

My first rental property! 4 unit apartment in a small Iowa city. Purchased for $53,000 with only $3500 down. Net cash flow is $300/ month after all expenses, repairs, cap-ex, and vacancy.

What made you interested in investing in this type of deal?

Low cost opportunity to generate cash flow.

How did you find this deal and how did you negotiate it?

I mentioned to a co-worked that I was looking to invest. He had this property for ten years and was tired of dealing with tenants. After looking at the deal, his price felt fair. I think I could’ve negotiated a little, but the money made sense and I didn’t want to get in an awkward scenario negotiating with a co-worker without an agent.

How did you finance this deal?

Commercial loan through a local bank.

@Don Konipol

Thanks Dan. I’m not interested in anything illegal.

 Collin- Sorry for the delay. I missed the notification. It was easy to bring up seller financing because I knew that his primary investments were foreclosures that he flipped and sold on contract. I brought it up and asked if he would entertain the possibility of financing because coming up with 20% on a commercial bank loan would push my cash limits. He told me that he liked to always get at least 5k down on his contract deals, so that's what I mentioned. However, I've shifted my thinking a bit. We're now looking at bank loan with a selling price of 53 and he would give me 5 back at closing that will reduce my money down. I'm overpaying 5k, so he still gets 48 in cash. The only drawback is that it increases his tax liability.

Hi, I’m looking for help structuring a deal on a 4 plex in Iowa. The seller and I (buyer) have decided on a price of 48,000. I want to use bank financing and can put 5,000 down. The seller has said he’s willing to cut me a check at closing for 5,000 on a purchase price of 53,000 (the bank is good with that price), but that would increase his tax liability. Is there a way he can transfer 5k to me so I only need to come up with 5k of my own money, but where he’s only taxed on a 48k selling price?

Thanks!

Thanks Jaysen. I don’t know that having the utilities split will increase the property value. I believe this is a good deal based on the cashflow potential. I really need to figure out what the metering work will cost. I’m sure of all the other numbers. This property is in a small community in Iowa. It’s not the best neighborhood in town, but it’s not the worst. The house is in good condition and has a new roof and newer mechanicals. It’s no slum. The reason I put 10% for the rate is that’s my seller financing option. I could put 10% down with a 24 month balloon, then refi. Otherwise, I can go to the bank and get a rate at 5 or lower with 20% down. $10k would be a stretch for me to put down and still have reserves left for repairs, cap ex, vacancy, etc. 

@Collin Cameron Thank you. The property is in Marshalltown. 

Hi, I'm looking for help on a seller financed deal for a four unit property in Iowa. I want to do a refi with a bank at a lower rate after I re-meter the property so that tenants are responsible for their own utilities. What I'm wondering is 1) is their a seasoning period so the bank sees a stabilization and 2) can I refi a four unit based on cap rate? I have spoken with a local bank about doing a refi for a SFR. They didn't need a seasoning period, and would refi at 80% LTV. Utilities are currently averaging 450/month for the whole property, so the only way I can see this deal making sense with low money down is if the tenants pay utilities. Rents are below market rate, so it could handle the increased cost, though that might mean turning over all four units. For context, there are two 1BRs and two studios. Rents haven't been raised on two of the units in over 10 years. Property is in very good condition and I could purchase at tax assessed value. The current owner is focused on foreclosures that he fixes and sells on contract. He doesn't like dealing with tenants, and has told me about all the issues with the current tenants. They're certainly manageable.

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Tyler, 

Can you talk a little more about the financing? The bank gave you cash for 80% of the ARV to purchase and remodel? What will this bring in for rent?

@pat 

@Pat L. Thanks for the heads up. If I do this, I plan to use an app to track my trips. I also understand it could invite attention into other matters.