All Forum Posts by: Mariah Jeffery

I'm considering trying to split the electric up and leave the gas as is. Perhaps a better route would be to install 6 different (non-tankless) electric water heaters?

Good idea! I'll look into submetering. The $800/month in utilities would eat me alive.

Yes, a separate area for the W/D is already there in the center of the building. Unfortunately, the electric for the W/D is on the same meter as one of the units, so the unit is charges at the commercial electric rate as well. Yet another reason so separate them, I suppose.

You're right, I forgot to mention vacancy. I usually use a 7% vacancy loss, although currently the area has near 100% occupancy because the economy is doing comparatively well with respect to the nation.

I have a 4-unit just a few blocks away from this one and 6 other properties within 2 miles. However, this one is very unique with the size of the units compared to the # of bedrooms so I'm struggling to estimate rents. A lot of tenants receive assistance from the county, which goes by # of bedrooms to determine FMR, so I could not get the rents I'm projecting with any Section 8 tenants. This may be a problem.

Thanks for the suggestions!

Good to know! It makes me wonder when anyone puts the laundry facility in, especially when this one has the hookups in two units.

I have no idea what this means, but I will research that. Thanks for the tip.

I had not. I'll look into that. This property is located in South Dakota where temperatures get well into the negatives, so I'm not sure if baseboard heat is an option.

I had thought about this but it's really difficult to calculate a B/E because I don't know how much I can raise the rent to account for the utilities. The electric bill averages around $75/unit/month so $1,000/75 = 13.3 months, which is a great B/E, but on the other hand I *should* be able to increase rents to account for electric being paid. But if we assume I'm paying at least an extra $25/unit/month that's a 40 month B/E period (without factoring in time value of $) so that's still pretty good ... I think I may pursue this route.

Part of the reason my rehab estimates are low is that my retired father in law does the work cheaply for us. He actually did an REO (though single family) rehab for around $3.5K. But I see your point, with 6 units there are likely to be tons of hidden costs that come up. Plus I need to add $6K for the electric conversion.

I will be putting a bid on an REO 6 plex in about a week, and I'm trying to figure out how much to offer with a lot of missing info.

Rehab
The units appear to be in excellent condition for an REO. One unit needs all new flooring. 4 need new refrigerators. The roof and siding are only a few years old. The biggest issue is the utilities; there are only 3 electric meters and 2 gas meters, so I'd be stuck paying all utilities. I'd want to put in tankless water heaters. I'm estimating about $5K is what it would take in total.

Rents
There is one 2 bedroom/1 bath unit, four 1/1's, and one efficiency. However, they are enormous for the number of bedrooms; the efficiency is 700 sq. ft and the other units are around 1,100 sq. ft. My other one bedroom units are about 500 sq. ft. and rent for $425 without any utilities included, so I'd guess these would be at least $600 for the one bedroom, $500 for the efficiency and $700 for the 2 bedrooms since all utilities are included. Rents estimated at $3,600, but I could be off. 2 units have W/D hookups, so for the other 4 units I'm estimating $100/month in laundry income, for a total of $3,700/month.

Expenses
Average cost for utilities is currently about $800/month for w/s/g, gas & electric for 6 units but I think I could reduce those with the tankless water heaters. Taxes are $3,600/yr and insurance is $1,500/yr. Property management would be 8.5%.
Total monthly expenses: $700 (estimated utilities after tankless heaters) + $425 T/I + $284 PM + $600 maintenance & misc. =~ $2K/month

Financing
5.5% fixed for 5 years, 30% down, 20 year am., rate increase capped at 2% every 5 years.

I don't have anything commercial yet so I'm not sure how to factor in the variable interest rate.

How much should I offer for this one?

Thanks! I should clarify, though, that I'm not actually planning to move. My job is portable but my husband's isn't. RE is still a part-time thing for us (mostly me). I'd love to live in Orlando, though.

I have 19 units in South Dakota where my husband's family lives. They do the maintenance and property management for us. The reason I chose to buy there instead of where I live is because in the Portland area, it's been near impossible to buy anything with decent cash flow for the last 5+ years. In SD, I have one property that meets the 2% rule and the rest are about 1.4%-1.7% (most closer to 1.4%). This gives me enough room to pay a property manager and maintenance person (w/ family discount), and still have good passive income. Doing business with family has it's pros and cons, but for the most part it has been working well.

I'm considering switching investing areas for the following reasons:
- There is a huge amount of competition for properties where I invest now. Last week, I put in a $65K bid on an REO listed at $59K. There were 4 offers the first day of the listing, with mine being the lowest. I have not bought property since March due to being outbid every time.
- A large percent of my family's net worth is already dependent upon the economy of a fairly small town, as well as familial relations.
- Things have changed here in Portland; I have actually seen duplexes in moderately nice areas listed on the MLS that almost meet the 1% rule. If I get really lucky, I may be able to find one that brings in 1.1% (since I'll only consider investing in a nice area that's within 10 miles of my primary residence if I'm going to manage it myself).

I'm considering trying to buy a property locally. Returns are still fairly meager, but I think I could get over $100/door cash flow if I find a good deal. The main benefit would be the control I'd have over it.

Another option is to try to buy properties in Orlando, FL, where I'm from and have family. My parents (60 and about to retire) are not interested in doing the PM work, so I'd have to hire a company, but my dad would help with minor maintenance. He'd help me look for a property and check up on it every now and then. I've only done a little research on price to rent ratios in Orlando, but on the surface they look to be much better than Portland and probably at least as good as SD. I visit Orlando once or twice per year anyway, so it would be nice to be able to write off some of that travel and to combine business with pleasure.

Changing investing areas will require a time huge commitment to do the due diligence, find a good agent, build a network, etc. I either need to go all out or just stick with the status quo. In Portland I could join the local REIA, but in Orlando I don't know where I'd begin. Any thoughts?

Thanks again for the advice.

No reason why this couldn't help you gain valuable experience with rehabbing. You can purchase a property that needs rehabbing, work on one unit at a time and rent out each unit after it is finished, Then sell the property to an investor and the sweat equity will be yours to invest in another property.

How about buying a 2-4 unit property and living in it for a while to get the more favorable owner-occupied rate? You can have your tenants pay for all of your expenses and save money pretty quickly that way.