All Forum Posts by: Matthew Schroeder

How about not doing gas at all and making everything electric ... electric furnace, electric range, electric water heater, electric dryer, etc.?

Since you are already splitting out the electric, then the tenant will be responsible for his/her own electricity usage.

You should take a cautious approach and get more information.

For a property like this, you definitely need sales comparables.  Irrespective of the cash flow projections, you don't know what the market price for the property is.  You don't want to overpay at Day 1.

Also, you need to see if there is any deferred maintenance (roof, furnace/boiler, etc.) or potential big ticket items.

Also, what is the status with the utilities?  Are the units separately metered?

Make sure that it is ok from a zoning/permit standpoint in your city to have a duplex in your location.  Some areas/neighborhoods are zoned only for SFRs, and if you should convert it to a duplex, you may find that you have issues with the city.

2 duplexes would be 4 units total.  

Do you mean two buildings with 4-units each (not duplexes), which would equal 8 units?

Insurance would depend on many factors including what is the market value & replacement value of that property.  You should ask an insurance agent to give you a quote.

If I were you, I would definitely check the sales comparables and see if the asking price is in line with market prices.  

Although we don't have a lot of information, for that type of property with those rents in a small, rural town in Central Illinois, on the surface, the asking price seems high.

Also, what is the situation with the utilities (gas, electric, water)?  Does the landlord pay?  This can have a big impact on your monthly cash flows, and as such, the fair value. 

Make sure to have an agent pull comps on the property.  Putting aside the cash flow projections (which are indeed important) for a moment, the comps will tell you whether you are getting a reasonable deal, making money (equity) at Day 1 (i.e. buying below market value), or, paying too much.  

Many times, novice investors will be so focused on the cash flow projections that they forget to remember that Rule #1 is "make money when you buy".

Good luck!

Definitely check with the zoning department to see if multi-family is a "permitted use".  A lot of upper middle class and high priced neighborhoods are not keen to have multi-family residential properties mixed in with single-family residences.

Many people ask about who the large employers are in Indianapolis (e.g. Eli Lilly Global Headquarters, etc.) and if employment is growing.  Here is some anecdotal evidence on the growth aspect.

Salesforce.com, a technology company headquartered in San Francisco and with a $45 billion market capitalization, is making Indianapolis its Regional Headquarters, and has just leased 220,000 of office space in downtown Indianapolis.  They are renaming the building into which they are moving to The Salesforce Tower.  The company, which is planning on investing $40 million over the next 10 years in Indianapolis, already has 1,400 employees in the city and is planning on hiring another 800 employees over the next 5 years.  That is a pretty good endorsement for Indianapolis.

Investment by Salesforce.com in Indianapolis Causes Ripple Effect

@Bryan Ghorbani  Something to note since it appears that you are an out-of-state investor ... if you are indeed east of Herron-Morton, you are almost certainly not in the Old Northside neighborhood.  Find an online map of Indianapolis, and you will see that the Old Northside neighborhood is south of Herron-Morton.

You need to do a "bottom up" analysis instead of a "top down" (i.e. $/sf) analysis.  Every situation is different and using a $/sf basis in your situation is highly problematic.  You haven't mentioned big items such as mechanicals (furnace, water heater, A/C), roof, electrical, plumbing, siding, structural, and other potential big ticket items.  If these are all in great condition, your number is going to be much lower.  If these things need to be replaced, the higher the number.