All Forum Posts by: Michael Yin

@Jack Martin When you say "we compiled a full DD package on the property" did that include just the financial due diligence (and not the results of a physical inspection and environmental)? Trying to understand the mechanics of wholesaling a MF.

@Erin Norris thanks for the clarification. I've adjusted my spreadsheet and I'm still getting negative cash flow.

@Roy N. I'll need to lookup that info along with a bunch of other if I decide to move forward with it.

@Kelvin K. & Curtis Riley thanks for the feedback on the additional due diligence I'll need to complete. I'm trying to determine if based on the numbers the owner has provided on how much rent he gets, and the assumptions I'm using for vacancies (10% of GPI), operating expenses (50% of EGI),taxes and insurance, if it's worth spending much time on DD unless the owner is willing to come down on price.

Hello everyone, I'm working on analyzing an opportunity to purchase several quadruplexes on the same street. This is my initiation into multi-family, so I'm operating from knowledge gained by reading several books (mainly Dave Lindahl). I need assistance ensuring I'm properly considering all the numbers to determine if it's a deal vs a dog, and then I also have a question about how to finance several 4plex that are separately deeded (but all owned by same seller). Your feedback is greatly appreciated. Here are my numbers... where am I off?

# of Units32

Rent per Unit$485

Gross Rents$186,240

Other Income$0

Gross Potential Income (GPI)$186,240

Vacancies Assume 10% vacancy rate $18,624

Effective Gross Income (EGI) $167,616

# of 4-Plex8

Price/4-Plex$120,000

Sales Price$960,000

Acquisition Cost Assume 20% down pmt + 5% other$240,000

Property ValueNOI/(Desired Cap Rate)$931,200

Operating ExpensesRule of thumb is 50% of Gross Rents (assuming tenants pay utilities) $83,808

Capital ExpensesUnknown (owner says 0$)$0

Net Operating Income (NOI)EGI - Expenses$83,808

Debt Services$75,396

TaxesAssume 1.25% of property sale price $12,000

Insurance Assume 1% of property sale price $9,600

Net Cash Flow-$13,188

Debt Coverage RationNOI/(Debt Services) 1.11

Capitalization Rate (Cap Rate)NOI/(Sales Price) 9%

Gross Rent Multiplier (GRM) 5

Cash-on-Cash Return (CoC)(Net Cash Flow)/(Acquisition Cost) -5%

@John T. and @Daniel L. thanks for sharing some of you knowledge and links.

I too am contemplating using a Land Trust in conjunction with doing sandwich Lease Options. I've been doing some research about the pitfalls of LO and have read that there are 2 things one could do to overcome them:

1. A good way to protect the deed/title in case the owner gets in creditor trouble is to have it transferred into a Land Trust when you make the deal with the Seller. The seller/owner is granted the beneficial interest to the trust. Then when you're ready to buy, the beneficial interest can be changed to your "entity" or your buyer's name. Is this a good approach, and who should be the trustee? Could the attorney setting all this up be the trustee?

2. I've also read that to protect yourself from the Seller backing out (and leaving you stuck with a Tenant/Buyer that want to close) you could have the Seller execute a Deed transferring the property to you/entity, and putting it in escrow. That way if you fulfill the terms of the agreement, the attorney can finish the transaction in spite of the seller.

Has anyone used these tactics successfully? Any feedback/thoughts/suggestions are greatly appreciated.