All Forum Posts by: Mike C.

Sorry Jazzmenn, the property is no longer available.

Mike

Hi folks,

Any recommendations for where to obtain good mailing lists for potentially motivated sellers in RI or MA (non-owner occupied, out-of-state, etc.)?  I've tried contacting about 4 title companies, but none of them seemed to have data that they were willing to provide.  Are there any options available aside from companies like Listsource?

Thanks,

Mike

Hi Scott,

There isn't a whole lot of information to work with in your post without knowing where the home is located (to see if your rent estimate is good), whether the maintenance cost is reasonable given the age/condition of house, etc.

The two main questions I'd have on the info you did provide are whether you're accounting for vacancy, utilities, and property management costs, even if you're initially expecting to self-manage.

Regards,

Mike

Hi Elisa,

Interesting question, I'm contemplating the same with a condo I purchased a year ago in SLU which has been my primary residence to date.  I plan to rent it out within the next year, but it will be cash flow negative by about $500/month, with the use of property management.

I think the best path depends strongly on what kinds of returns are you looking to get and the expected appreciation.

I decided to develop a modeling tool to analyze both of our situations, so I thought I'd share some of the results and open it up for discussion.

I'm making the following assumptions:

• You put 25% down at purchase
• Market value equaled your purchase price when you bought 5 years ago
• You're self-managing
• Monthly expenses of $200 maintenance (to cover risk of special assessment, improvements to interior, replacement of appliances, etc.), 5% vacancy, $50 insurance, $200 taxes
• Increases in rent just absorb increases in other monthly expenses
• 3% annual inflation
• Cost to purchase was 2% of purchase price; cost to sell is 9.5% of final sale price
• You're not doing a 1031 exchange, resulting in 15% capital gains tax when sell

Below I've plotted what I'm calling the "effective interest rate" (there's probably a more correct term, but I'm defining this as the annual interest rate that would result in the same net return on your invested capital that you would get by selling your condo in year X) assuming a 3%, 5%, and 7% appreciation:

To me, this means that if you think the annual appreciation of your condo will be around 5% and you're happy with effectively getting a > 10% return over the next 10-15 years, then I'd wait to sell until that time has elapsed and the market is not depressed.

For reference, I pulled data for all 1 bedroom condos in zip code 98121 sold from 1995 onward, and you'll see an average appreciation rate of about 7% in this data set:

But, if you think you can get equal or better returns elsewhere at lower risk (perhaps you're seeing the HOA as one of these risk factors - otherwise it seems pretty safe to me...), then perhaps you can take your great return now (which I'm assuming will be about 150-200% of your original investment, or over 10% annualized return over 5 years) and put that to good use elsewhere!

Happy to discuss further and review my model with you (made it yesterday afternoon so it may still need some tweaks), and perhaps I'll post some details about my own condo situation once I wrap my head around it further.

Regards,

Mike Catalfamo

Thanks for sharing the detailed write-up, Curt, it was very educational.  Congratulations and best of luck!

Mike

Fourplex Fixer in Port Orchard, WA; water view: $145K ask, $150-175K rehab, $380K ARV based on 7% cap

This is an exciting fourplex opportunity in Port Orchard, WA in Kitsap County - 1-1.5 hours from Seattle via car or ferry) which is in the middle of a complete rehab. An excellent value-add opportunity for a flip or long-term hold with great cash flow.

For-sale, asking price $145k or best offer. Estimated $150-175K rehab (with a GC), $380K+ ARV. Not financeable with traditional bank loans due to mid-rehab state, so I'd be looking for cash or I can recommend a hard money lender that is already familiar with the property.

7 bedrooms, 4 bathrooms. 3908 square feet. Original year built is 1935. Underwent a renovation in 1973. The current rehab project was started by the previous owners but unfinished.

Two of the units have water views. Quiet neighborhood with a good rental demand, given that it’s a 15 minute drive from Navy base in Bremerton and a 6 minute walk to the Annapolis Foot Ferry Dock.

There are also two smaller lots (one on each side of the property) which are included in the sale; possibility of subdivision should be considered.  There's a trailer on one of the lots that needs to be removed.

The main work to be done includes insulation, drywall, finish work, and sprinklers. Inspection and GC estimates are already done and are available for review. Rehab cost based on several GCs’ bids. Electrical and plumbing rough in is checked off. Framing should be once fire sprinklers are installed. Repair costs lower if you can do or sub out any of the work yourself.

Reason for selling: My partner and I originally intended to rehab and hold the property as a rental. We found that we would not have capital to fund the full rehab cost and decided we did not want to have an extensive rehab as our first project. However, because we had the price reduced low enough, we decided to purchase the property with hard money and are looking to wholesale it to another investor with rehab experience.

More pictures: http://1drv.ms/1NINgcH

Estimated expenses, assuming self-managed:

• Vacancy: $380 (10%)
• Insurance: $100
• Taxes: $3500/12 = $300
• Utilities: $150
• Maintenance: $380 (10%)

Income method of valuation, based on projected average rent/unit of $875:

• Cap rate (with maintenance expenses) - assume 7%
• Projected NOI = (875*4*0.9 - 100 - 300 - 150 - 380)*12 = 26,640
• Estimated ARV = NOI/cap rate = 26640 / 0.07 = $381k
• Note: Cap rate is based on 6 multi-family properties that sold in the last year in the in the Port Orchard and Bremerton area and rough estimates of NOI based the rents shown in the MLS listings, the sold prices, and assuming that NOI would be 60% of gross rents (e.g., "50% rule" with 10% not going to PM). The average cap rate from these six properties was 6.3%; using 7% as a conservative estimate from a valuation standpoint. ARV with a 0.25% reduction in cap rate is $395k.

Estimated cash flow based on a refinance exit strategy assuming 5.5% interest on a $295k 30 yr loan; self-managed: $575/month

Contact me ASAP for more details, analysis, pictures, video, context on why we're selling, answers to questions, etc. E-mail [email protected] or call 401-440-6845.

Buyer to verify all information.

Fourplex Fixer in Port Orchard, WA; water view: $145K ask, $150-175K rehab, $380K ARV based on 7% cap

This is an exciting fourplex opportunity in Port Orchard, WA in Kitsap County - 1-1.5 hours from Seattle via car or ferry) which is in the middle of a complete rehab. An excellent value-add opportunity for a flip or long-term hold with great cash flow.

For-sale, asking price $145k or best offer. Estimated $150-175K rehab (with a GC), $380K+ ARV. Not financeable with traditional bank loans due to mid-rehab state, so I'd be looking for cash or I can recommend a hard money lender that is already familiar with the property.

6 bedrooms, 4 bathrooms. 3908 square feet. Original year built is 1935. Underwent a renovation in 1973. The current rehab project was started by the previous owners but unfinished.

Two of the units have water views. Quiet neighborhood with a good rental demand, given that it’s a 15 minute drive from Navy base in Bremerton and a 6 minute walk to the Annapolis Foot Ferry Dock.

There are also two smaller lots (one on each side of the property) which are included in the sale; possibility of subdivision should be considered.

The main work to be done includes insulation, drywall, finish work, and sprinklers. Inspection and GC estimates are already done and are available for review. Rehab cost based on several GCs’ bids. Electrical and plumbing rough in is checked off. Framing should be once fire sprinklers are installed. Repair costs lower if you can do or sub out any of the work yourself.

More pictures: http://1drv.ms/1NINgcH

Estimated expenses, assuming self-managed:

• Vacancy: $380 (10%)
• Insurance: $100
• Taxes: $3500/12 = $300
• Utilities: $150
• Maintenance: $380 (10%)

Income method of valuation, based on projected average rent/unit of $875:

• Cap rate (with maintenance expenses) - assume 7%
• Projected NOI = (875*4*0.9 - 100 - 300 - 150 - 380)*12 = 26,640
• Estimated ARV = NOI/cap rate = 26640 / 0.07 = $381k
• Note: Cap rate is based on 6 multi-family properties that sold in the last year in the in the Port Orchard and Bremerton area and rough estimates of NOI based the rents shown in the MLS listings, the sold prices, and assuming that NOI would be 60% of gross rents (e.g., "50% rule" with 10% not going to PM). The average cap rate from these six properties was 6.3%; using 7% as a conservative estimate from a valuation standpoint. ARV with a 0.25% reduction in cap rate is $395k.

Estimated cash flow based on a refinance exit strategy assuming 5.5% interest on a $295k 30 yr loan:

• With above-listed expenses, self-managed: $575/month
• With property management: $225/month

Contact me ASAP for more details, analysis, pictures, video, answers to questions, etc. E-mail [email protected] or call 401-440-6845. Will be accepting offers over the next couple of days.

Buyer to verify all information.

Fourplex Fixer in Port Orchard, WA; water view: $160K ask, $175K rehab, $380K ARV based on 7% cap

This is an exciting fourplex opportunity in Port Orchard, WA in Kitsap County - 1-1.5 hours from Seattle via car or ferry) which is in the middle of a complete rehab. An excellent value-add opportunity for a flip or long-term hold with great cash flow.

For-sale, asking price $160k or best offer. Estimated $175K rehab (with a GC), $380K+ ARV. Not financeable with traditional bank loans due to mid-rehab state, so I'd be looking for cash or I can recommend a hard money lender that is already familiar with the property.

6 bedrooms, 4 bathrooms. 3908 square feet. Original year built is 1935. Underwent a renovation in 1973. The current rehab project was started by the previous owners but unfinished.

Two of the units have water views. Quiet neighborhood with a good rental demand, given that it’s a 15 minute drive from Navy base in Bremerton and a 6 minute walk to the Annapolis Foot Ferry Dock.

There are also two smaller lots (one on each side of the property) which are included in the sale; possibility of subdivision should be considered.

The main work to be done includes insulation, drywall, finish work, and sprinklers. Inspection and GC estimates are already done and are available for review. Rehab cost based on several GCs’ bids. Electrical and plumbing rough in is checked off. Framing should be once fire sprinklers are installed. Repair costs lower if you can do or sub out any of the work yourself.

More pictures: http://1drv.ms/1NINgcH

Estimated expenses, assuming self-managed:

• Vacancy: $380 (10%)
• Insurance: $100
• Taxes: $3500/12 = $300
• Utilities: $150
• Maintenance: $380 (10%)

Income method of valuation, based on projected average rent/unit of $875:

• Cap rate (with maintenance expenses) - assume 7%
• Projected NOI = (875*4*0.9 - 100 - 300 - 150 - 380)*12 = 26,640
• Estimated ARV = NOI/cap rate = 26640 / 0.07 = $381k
• Note: Cap rate is based on 6 multi-family properties that sold in the last year in the in the Port Orchard and Bremerton area and rough estimates of NOI based the rents shown in the MLS listings, the sold prices, and assuming that NOI would be 60% of gross rents (e.g., "50% rule" with 10% not going to PM). The average cap rate from these six properties was 6.3%; using 7% as a conservative estimate from a valuation standpoint. ARV with a 0.25% reduction in cap rate is $395k.

Estimated cash flow based on a refinance exit strategy assuming 5.5% interest on a $295k 30 yr loan:

• With above-listed expenses, self-managed: $575/month
• With property management: $225/month

Contact me ASAP for more details, analysis, pictures, video, answers to questions, etc. E-mail [email protected] or call 401-440-6845. Will be accepting offers over the next couple of days.

Buyer to verify all information.

Hi fellow Seattle area wholesalers,

I've recently started my first marketing campaign (initially directed towards non-owner occupied properties in Snohomish and King counties).  I'm hoping to gather some data to get a sense of how extensive one's marketing efforts need to be in order to find great deals, and what types of seller situations are most commonly encountered in the context of wholesale deals in our area, if that's possible to characterize.

I suspect this type of context would help a lot of new folks understand roughly what it takes to be successful, specific to this area. So, I propose some questions to get the discussion started (whichever ones you're comfortable answering :-)). 

     1. (Very roughly) how many wholesale deals have you done in 2015?

     2. What were the most common reasons why the seller wanted to sell to you at a deep discount, instead of going on the "hot market" and selling through an agent?  (This is one of the objections that comes up when considering the potential success of a wholesaler in this area, when properties tend to sell on the market with multiple offers very quickly.)

     3. For those using direct mail marketing, what were the response rates? (I do realize that this may depend a lot on what class of potential seller you're marketing to.)

     4. What is your favorite/most effective method of marketing?

     5. What specific locations do you focus on?  (This might help provide additional context and allow flippers reading this thread to connect with any wholesalers who respond in their target markets.)

     6. "Bonus" question - What's your take on RCW 61.34 (Distressed Property Conveyances)?  Does it significantly limit the types of deals which you can legally do?

Hopefully this leads to some good discussion and provides some useful data for those getting into this area.

Regards,

Mike Catalfamo

Hi @Carol H., welcome to BP!  Congrats on having bought two rental homes - where are they located and for how long have you had them?

Mike