All Forum Posts by: Matt D.

Quote from @Matt D.:

Looking for flexible lenders to help fund future deals and current operations. Have done 12+ renovations, have ~$750k in equity free and clear on the market in houses on MLS. Must be flexible lenders looking to partner up, have plenty of collateral to back up loans - but I need flexibility in terms, as I sell houses frequently and need to be able to keep financing open for the next project(s), have 2 under renovation now and a few prospects I'm looking at. PM me if interested.

 Location is WV. 

Looking for flexible lenders to help fund future deals and current operations. Have done 12+ renovations, have ~$750k in equity free and clear on the market in houses on MLS. Must be flexible lenders looking to partner up, have plenty of collateral to back up loans - but I need flexibility in terms, as I sell houses frequently and need to be able to keep financing open for the next project(s), have 2 under renovation now and a few prospects I'm looking at. PM me if interested.

Hey everyone,
Running into some road blocks in acquiring insurance for a 12 unit apartment complex details below. It’s a little unique, so the “regular” insurance providers won’t quote it, or the quotes I do get seem exorbitant.  Any ideas or referrals would be appreciated!

Details :
12 units total, 2 buildings on same tax/county parcel. Fully vacant, needs rehabbed. Current market value approx $250k. Market value after rehab approx $900k. Rehab estimate is $360k ($30k per unit) - this is to get it into very nice higher end condition.  Need dwelling coverage in event of fire or loss to structure, and also liability for contractors when rehabbing property. 

Once renovated would need to switch coverage to account for rental with tenants, etc. rehab time approx 6 months, maybe sooner (I hope)…
 
Thanks

Matt

Quote from @Ari Stern:

With an NOI of $75,600, utilizing a 75% LTV, and using an interest rate of 8%, and assuming a 30-year AM - the way to get to a 1.25x DSCR is by using an 8.25% cap rate, which will give you a value of $916,364.

Keep in mind, that only works with a 30-year AM mortgage. If the lender is only willing to give a 25-year AM, that will drop the DSCR to 1.19x. In that scenario, to maintain the 1.25x DSCR, you will need to bump up your cap rate to 8.65%, giving a value of $873,988.

Hope that helps.

Very helpful, and in line with what I was thinking and calculating. Appreciate it !!

Quote from @Ari Stern:

The first question you need to ask yourself is, are you looking to price the property like other unrealistic sellers out there, still living 9 months ago in a 3.5% interest rate world? Or are you looking at the property like an investor, and pricing the property in a way that makes sense.

Lenders tend to use industry standards for expenses when underwriting deals. Just back of the napkin, since the property was just renovated, for this example I would allocate a 30% expense ratio (although it can easily be much higher, especially since it's a relatively small property).

EGI - $108,000

Expenses - $32,400 (30%)

NOI - $75,600

At this point, it depends on two things. What's the cap rate is in the area? And based on today's interest rate, assuming a 70-75% LTV, does it DSCR at a 1.25x?

Crunch those numbers, and you’ll find a value that makes sense.

All the best.

Thanks Ari. I'm looking at the property as what price do I need to market it at to have investors seriously interested, and be able to conclude a deal that is fair and favorable for both parties. So an investor based market valuation. Based on your metrics, I am assuming about a $900,000 selling price, which coincides (ironically) to 1% or monthly gross rent. Cash flow of $75,000, divided by 1.25 DSCR = $60,000. When looking at mortgage calculator on 8% loan, that yields around a $900k value (assuming 25% or so down payment). Is my math or valuation semi-accurate ?

Thanks

Matt

Quote from @Mason Hickman:

@Matt D.

Cap rate will vary widely based on market. Is this an A market with rapidly increasing population and jobs or in a tertiary market with declining population and no job growth?

Mason,

I would say the area is “steady”, and always has been.  It’s kind of geographically protected by local industry and doesn’t feel the brunt of economic impacts as you would in a large metro areas, it’s always been that way around the area. So the rents will never go down much if any, but they won’t go up exponentially either, just slowly increase over the years basically. It’s a rural type area, but it’s the city center location that brings all the rural population to this zone, if that makes sense…. Example, in 2008, the market was little affected.

Thanks

Matt
 

Quote from @Taylor L.:

First thought is no way is that place actually netting $7k out of $9k gross while being properly maintained. The price has to factor in its condition, which is probably not fantastic.

The condition is going to be fully renovated and updated, pretty much new everything. Maintenance costs will be low, tenants pay all utilities.  Taxes approx $400 month, insurance about $400 - $500 month. Assumes $1k a month on maintenance, because again - it’s all renovated new and made “tenant proof materials”. There is also upside on the $9,000 month gross, being conservative there for higher rent demand and little vacancy due to no where to live in this area.  But if you want to call it $6,000 a month net, that wouldn’t hurt my feelings to be conservative.  So….. what is that worth in current market conditions to an investor? Note, no property management company currently, all done internally.  No loan, straight cash flows. 

looking for ball park figures only, cap rate of 5% seems low to me given market conditions and interest rates/CD rates. 

Thanks

12 unit apartment complex that will gross $9,000 month in rent, after expenses nets about $7,000 per month.  Fully renovated, Low property tax area, low insurance area. No mortgage on it.   High rental demand due to little availability in area and high demand for cheap housing. What do you guys think it’s worth on resale - selling price?

Thanks

Any insurance experts that can contact me?  Need remodel insurance, liability, dwelling, and possible WC based on how my business is setup.  Needs to be flexible as we are constantly turning over multiple properties. 

Need professional guidance on setting up company, LLC, Corp, not sure yet. In the state of WV, and maybe TN. Have real estate invesment flip gains and looking to start putting gains in Multi-Family complexes. If easier to DM, please do so.