All Forum Posts by: Nicholas U.

Ya the market is tight period.  You can go down the construction loan path, which is what I am assuming you are talking about, but the loan won't be finalized until construction is complete and they need quotes and everything.  If you doing this yourself it just isn't an option.  

You could try finding a co-investor to try and split costs with.  

So for me there are 3 things.  The last being COVID

1) Purchase Price - In my location it is absolutely insane what people want for units.  Most of them are rundown too.  I can't make any money on the property with the repairs needed.

2) Lending Costs - Rates aren't awful right now but finding a lender can be tough without paying a lot of points.  You hit it up with the yearly taxes on the units you pretty much taking out 1 months of rent right from that.  So it is making sure you have a good estimate on what the taxes are.  Finally if you are looking at a Multifamily unit you probably going to pay at minimum 20% down up to 25% down.  For someone who is just starting that can be a big amount of cash to hand over immediately.  

3) COVID has to be taken into account.  Now I have just made an offer 2 weeks ago and other yesterday on a property so it comes down to budgeting your risk.  

I don't disagree with you that this will affect most likely everyone here but we won't start seeing real damage until May.  Those you have good relationships with their tenants should hopefully be hearing from them about their situation and to me the idea is that if you have a good tenant in a bad situation figure out how to work with them until the storm passes.  If you have a bad tenant there isn't a lot that is going to change.  If they were trouble before they will be more trouble now.  People should consider all options with them including buyouts.  

The market in my area is generally overvalued and some are borderline unreasonable.  People are trying to sell properties after a few years owning it for a 50% profit without putting any money into it.  Many of these properties are in desperate need of major repairs thanks you "deferred maintenance" (I hate that term).  For example, the vast majority need a new roof.  Assuming that the boards underneath aren't destroyed you are probably looking at $20,000-$25,000 just for that.  What makes matters worse is that right now no one is willing to adjust the pricing because people bought properties overvalued and now are trying to sell overvalued.  It is like a ponzi scheme and someone in the end won't be able to sell.

As a result, I spend a lot of time evaluating the property during an inspection phase.  If the roof is bad I generally expect a steep price reduction.  To me, a bad roof means that the owner isn't properly maintaining their property.  What are some things that you see that makes you immediately consider backing off?

I don't expect April payments to be the issue but rather May.  Most people would have been laid off a few weeks ago and probably still received some sort of check.  I haven't had any issues yet but at same time starting in May I am reducing all rents by 20% if they pay early.  My message to all tenants is if you need the help then it hopefully this takes some stress off.  If you don't please donate it to people who may need help.

It has been very positive so far and  I believe it also establishes good relationships.  Better/Happy tenants will benefit any landlord in the long run.  

Fountain Square is extremely popular spot so you are obviously looking in a good area.  I probably talked to 10+ lenders to see who would have best rates and would be most responsive.  Then it is just seeing as many properties as possible so you can start gauging what homes are going for.  People I have found are willing to spend asking on just about everything so it is getting in first.

I live in Lafayette, Indiana and have owned a single family rental for a number of years.  It makes excellent cash flow and I have been wanting to find a multi-family property to invest in.  So about 4 months ago I started looking and watching the market.  I wanted to buy in Lafayette because I know the area extremely well and have good ideas of where there is good potential for growth.  I quickly learned that the rental market in Lafayette is extremely hot.

1. Expectations from sellers are very high.  Most wouldn't even meet the 1% rule and would require repairs.
2. Properties went fast.  On and off the market in a few days
3. Properties that stayed were dumps and not cheap.  Sellers refused to lower price
4. Properties are being bought from people outside the state and some sight unseen

So I expanded my search to Indianapolis and some of the surrounding areas, while still paying attention to any new listings in Lafayette.  I see a number of people on Bigger Pockets wanting to get into the Indianapolis market and it makes somewhat sense to me.  There are lots of properties that you can either flip or rehab into rentals and even the ones fixed up are not a bad price.  For newbies like me it makes it easier to get into the game because in Indiana banks want 25% down.

Knowing this I was also extremely cautious...  I have family and friends that do and have lived in Indianapolis.  In good and not-so-good neighborhoods.  If you aren't careful you will be burnt.  I contacted some of my realtor friends from the area and they notified me that they would contact me if they believed if anything was in a spot that is or is becoming attractive.  Suffice to say I didn't get much feedback.  Similar to Lafayette, if something good appeared it soon disappeared.

I started contacting the Seller's Agent almost immediately after listings appeared so I could be the first, or one of the first, to see any properties.  I gave them numbers that I believed would work, BIG THANKS to Bigger Pockets and their Real Estate Buy or Hold Tool, and if they rejected it I was ok.  One duplex was built in 1890 listed for $89,900.00 but there were warning signs that there was knob and tube and upon asking it was confirmed.  There was also plumbing issues, plaster issues, and bathroom issues.  I still made an offer but only at $83,500.00.  It did have a new roof and furnace and the layout was nice and in a pretty good location.  Figuring I had $40,000.00-$50,000.00 in repairs I felt it was fair offer for the market.  They got asking price with no inspection.  Oh well...  The next property was a 4-plex for $250,000.00.  First 3 units were pretty good and I was getting somewhat excited...  Then the 4th unit was shown.  Smelled of gas and completed destroyed.  Again it got close to asking.  

Now in some areas that might be ok but in Lafayette and the area it was in there was a limit on how much rent these units could get.  I would have only made a 2% cash on cash return...  No thanks.

Finally, one came one the market.  3-plex but 11 beds and 6 bathrooms.  $205,000.00.  Went out and other than the gutters the place was in great shape.  It could use some mini-splits but new furnace, 5 year old roof that looked in very good condition, 2 units mostly renovated.  Most of work that needed to be done appeared cosmetic.  I offered asking contingent upon inspection and here we go.  The cash on cash return is around 16% and because of the size of the units there is significant growth opportunity for being able to increase the rent in future years and for the property value.  

In the end, I wanted to say after lurking around here, reading, posting, watching webinars, and just being patient I think that I am in a great position for the future.  I will have a plumber, electrician, and contractor come with me on the day of the inspection to make sure I didn't miss anything but if anyone has any other suggestions on where to go from here it would be appreciated!

Thanks for reading!

Thanks for reviewing!  I will ask the electrician about it at same time and I appreciate the advice in regards to how it would affect market.

My uncle who owns a large number of units in Halifax recommended to me mini-splits but because of the new furnace I wasn't sure if it was cost effective since we didn't need the heating.  Currently, house is all electric.

The windows are all probably about 50+ years old, but overall in ok shape but you can tell they are letting a lot of cold air in.

Finally, I have accounted for lawn care and the interest rate is based off my mortgage lender and it might even be lower as I talked to her this morning again.  I was surprised by this too.

View report

*This link comes directly from our calculators, based on information input by the member who posted.

This will be my first multi-family purchase and would like some input.  It is a brick duplex built back in 1890.  The roof and furnace are both brand new and the listing price is $89,900.00.  It is a 2 bedroom on bottom floor and 1 bedroom on top (with ability to make into 2 bedroom by finishing attic).  It is 2200 sq ft.

A few issues

1. The home still has some knob and tube wiring
2. Bathrooms need major update
3. Kitchens could use some updating but for most part ok. 
4. A lot of plaster/drywall issues
5. Currently using Window A/C units - not sure worth upgrading
6. Windows need replacing and needs more insulation in areas.

Talking to my property managers the average 2 bedroom runs between $600-$750 and 1 bedroom from $575-$650.  Most of the ones on lower end are not updated at all though.  I do think I have a conservative estimate of $30,000.00 in repairs.

Finally, the electric is not on separate meters so we will be adding on an estimated electric and water/sewage amount to their rent.  This makes it a bigger priority to insulate the home.

Currently, there are no renters either as it is just being used by the owner's son.

Look forward to everyone's opinion and feedback!

Quicken Loans I have found in the past to have higher rates and other issues.  Now I am looking into a non-owner occupied 3 unit multi-family and I need to put 25% down.  

Just how market is for this type of lending if you looking at conventional 30 year fixed.