All Forum Posts by: William Coet

Info: Seller owns the multifamily house outright and has owned it for 40 years. They will be facing a capital gains payment of around $110,000 (Ouch!).

Questions:

1. If i give them a down payment and they finance the sale over 20 years, are the capital gains deferred or is it taxed at the income tax rate?

2. If capital gains are deferred does that mean they pay each year?

3. Do they pay on the interest and the principal, or only one of them?

Thank you for any info.

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Quote from @Chris Seveney:

@William Coet

Capex is typically not included in NOI calculations

Thanks,
And what about property taxes?

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Hello,

I'm trying to calclulate the Debt Service Coverage Ratio. In order to determine NOI, do I include only annual repair and maintenance expenses or also a budget for long-term capital expenditures (roof, heating, etc)?

Also, do banks include property taxes included in the NOI calculation?

Thank you!

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Quote from @V.G Jason:

If an asset is priced intrinsic in times when the cost of capital is higher relative to the last 15 years that should be the most suspicious. If the fundamental basis of investing is strictly cash flow, you'll want to make sure your net income per month is actually double your mortgage. Anything less is truly not cash-flow.

You want to not buy based off just intrinsic or cash-flow centric but the qualities of the property and the area. How big is the land, cost to rebuild, insurance issues, economy in the city, accessibility, population. If all those are growing and in the right direction, you're actually hoping over time the property becomes even less intrinsic to buy so the earlier you get it(assuming price moves up over time) the better.

The assumption to disengage from possible rental increases is as asinine as thinking insurance and taxes don't increase. Will it go up linearly? No. Will it go up in a straight line? No. Will it be up & down yes. That's why you invest, don't trade, in physical assets. Give it at least 8 years, closer to 12-15. IF you don't have the balls or finances to weather that kind of time frame, go buy some equities or govt debt.

Thank you for the reply. I appreciate your insight.

I'm trying to understand the term "intrinsic" and how you are using the term in this post. I looked up the definition of intrinsic value and found this and wondering if there are any specific differences in the real estate category as you are using it:

"In finance, the intrinsic value of an asset or security is
its value as calculated with regard to an inherent, objective measure.
A distinction, is re the asset's price, which is determined relative to
other similar assets."

Thank you

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My guess is that it is localized. Different municipalities handle revaluations differently

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This is considered urban. Recourse is fine. (although NY is a non-recourse state it may not apply to multifamily).

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@Carlos Ptriawan

Thanks for your thoughtful replies in this thread. In the following quote from your last post can you define or describe the following terms:

1. Public Interval Fund

2. BDC

3. Equity Investment (What type of equity is offering 8-9% IRR)

4. Debt Investment (what type of debt investment are you referring to?):

I can always generate 8-9% "almost safely" with public interval fund or BDC while equity is also offerig something like 8-9% IRR, so between debt investment and equity investment , is not big of spread.

Thank you!

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Quote from @Ko Kashiwagi:

Hi William,

Are you talking about a short-term or a 30 year? If the loan amount is less than 500k, there is a lot less lenders that can do these types of loans compared to 1-4 or 10+ units and rates tends to be higher. For 30 year fixed loans, the rates will vary by the NOI and LTV - if you go 60% LTV you could be possibly be in the 5-7's. If you go 75% LTV you could be 8-9's. There's a lot of missing pieces here.

Ko,

Ideally 30 yr. 80% LTV.

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New York State

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All Forum Posts by: William Coet

William Coet has started 207 posts and replied 570 times.

Post: Casting a net here for multifamily properties and local investors

Post: Seller Financing and Capital Gains. Are they not applied or just deferred?

Post: Net Operating Income: Do Banks Consider A Long-Term Capital Expenditure Budget?

Post: Net Operating Income: Do Banks Consider A Long-Term Capital Expenditure Budget?

Post: Is This Irresponsible or Sophisticated?

Post: Why regular property tax reassessments are overlooked when underwriting a deal?

Post: What are the Best Current Rates/Lenders for 6+unit Multifamily?

Post: Multifamily Prices so High that Only Cash Makes Sense, But Why Not Put Cash in CDs?

Post: What are the Best Current Rates/Lenders for 6+unit Multifamily?

Post: Where to find 30 year mortgage for 5+ unit multifamily?