All Forum Posts by: Mitch Bernay

Really, Will? I'm surprised -- what would you do -- come in on straight building value?

Thanks to everyone who replied! Just to let you know what happened . . . I informed the seller that he could expect an offer in the next day or two, but that among other things, I would insist on seeing the bank deposits for the last two years to verify the income and timeliness of the rent payments, and also verify the building expenses. Without missing a beat, he told me that "it's impossible, they all pay cash and my bookkeeper didn't deposit everything." Needless to say, I've decided to pass on making an offer. BTW: what a great web site!

All excellent tips. Especially like "subpar rentals attract subpar tenants." My personal favorite is "purchasing a rental with borrowed money." Each of my properties are paid for and that has solved a lot of problems -- It increases my NOI, I've gotten better bargains by keeping my offers clean with short escrows, and best of all, I never hear the ticking sound of the next mortgage payment pressuring me to take the wrong tenant b/c I'm "desperate to fill a vacancy."

Thanks for quick replies. Yeah, there is a vacancy factor figured in of one unit every three months -- there just isn't a lot of low cost rental apartments in this area. I think the 69K is conservative, but also realistic. The upside is that there is potential to add three additional units gradually raise rents as tenants move out and I spruce up the units -- no reason the 350s couldn't be turned into 450s. Totally forgot to figure in a manager's and bookkeeper's fee! Thanks Mike! Back to the spreadsheet!

Hi everyone! I currently own rental houses and want to make the jump 20 unit building, four of which are commercial spaces. This is a what would you do question: The building is 100 years old and mostly made of 1 bed apts that are fairly run down, and renting for 350 to 450/mo. The tenants are all lower middle income and seem very content. The building is 24000 feet with lots of hallwys and public areas, and typical 1 bedroom is around 750 sq. ft.

Note: this would be a cash purchase with no debt.

Calculated the NOI of $31k as follows:
Gross Revenue: $101,000
Taxes, Insurance, Utilities: $27252 (verified)
All told, the Gross Revenue is $101,000 per year. Having veriified the utilities and taxes and insurnace, and allocating $27,252 (verified)
annual repairs/upgrades $20,000 estimated
annual upkeep, paintining, etc., $12000 estimated
parttime maintanece man $6000
All told: about 69K
My CAP rate, if using the asking price of 265K would be 12%

Note, I could own that building 20 years and never ever be done with upgrades and improvements. I live 12 blocks away from the building and would manage it myself.

So, wise people, assuming the future looks like today, what would be a steal of a deal for this property?

Thanks!