All Forum Posts by: Paul Lachaud

@Christopher Brainard: I'll keep this in mind. I have some rapport with the seller, but not much (same profession, same company, bought this house as his first property at my age 45 years ago). I'll be careful with asking for too many repairs. I'm just listing the big ones here. I have a decent CapEx plan.

@John Leavelle: I'm prioritizing the structural assessment, trying to get a professional engineer (P.E.) schedule to come out as soon as possible (tough with me being out of town for the holidays).

@Jacqueline Peterson: I was tempted to forego the home inspection because things looked okay during my initial walk through and I didn't budget for the cost. I'm very glad that I paid for it. He genuinely has concerns about the structural issues, we talked about that alone for a significant amount of time. The cracks are excessive and only in the units on the left side of the building. One of the bathroom floors show evidence of settlement, it was lowered by a noticeable amount.  Cracks on the house exterior on the left side. All of that combined is the source of concern (he thinks the source may be water damage leaking out the foundation.

As for the electrical wiring, he opened up all 5 of the circuit boxes and said everything is to code (even took the time to explain to me what people typically get wrong).

@Michael Karl: I'll ask for him to get the furnace serviced and cleaned. 

Hey Biggerpockets,

I've put my first fourplex under contract for about $95k earlier this week and had a home inspector come out. He seemed extremely knowledgeable, thorough and provided great service.

He'll be sending me a full report with recommendations and photos by the end of the weekend, but he provided a short summary for now. Here are his top priority recommendations:

• Get a certified HVAC assessment of the furnace. Although it is has not had any significant problems, it was installed in 1994, and has reach the"end" of its useful life on paper (20 years). It may last another 10 years without issue, or it may conk out this year...
  • Heats all 4 units
  • Owner pays gas for heating in all 4 units (There are 4 individual meters in the house for stoves, and 1 house meter for heat and dryer)
  • Generates heat by creating steam that ciruclates in radiators in all units
  • Tenants have no control, it is regulated by a thermocouple outside the house
• Get a Structural Assessment
  • Termite Treatment
    • Evidence of termite treatment in the past (dug out tunnels)
    • Evidence of new tunnels, though they are likely inactive due to cold.
  • Fire Damage in back corner of basement, everything is replaced but some joists in opposite corner so beyond surface damage (he recommended I get records of the work done)
  • Cracks inside and outside on second floor
• Roof- recommends consulting a roof contractor
  • Overall good
  • Damage over the entry way
• Get Main sewage pipes scoped. Water may be leaching out under the basement floor (might be associated with cracks)

There are a bunch of little things that are easy to fix (doorbells not working, loose window seals, smoke detector batteries, ect). I really want to get opinions on the big ticket items though. Should I attempt to negotiate the price down, or have the seller fix them all. Or a combination.

Put it under contract. Getting an inspection tomorrow.

@Troy Beebe: I've requested the actual expense receipts and records. I hope that they fall in line with my estimates. Unsure what I'd do if expenses were significantly higher.

Thanks for the help everyone.

@James Taylor: Don't count me out yet! Putting an offer in.

@Erin K. Thanks Erin. It definitely helps me stay organized, making sure I make a proper decision. Good to hear a property with similar numbers worked out for you.

@John LaMedica

Hey John,

I actually built the sheet in excel myself. Just added a little bit of formatting to make it look nice so I can quickly copy and paste the tables into a document if I ever need to present a deal to a lender.

I can send you a copy, but I recommend going through the exercise of putting one together yourself, just so all the assumptions make sense for your case.

In addition there is always the BiggerPockets calculators you can use!

Hope this helps.

I've added this to my calendar. Look forward to meeting all of you.

@John Leavelle: He owns it straight out. I've seen the property, he showed it to last week. The property is in pretty good condition, I need to figure out my value add (it might just be getting it off his hands). I'm going to make an offer soon. 

I'll let you know what happens.

Here is the updated analysis summary (I made a few corrections with my formulas). I think the ROI looks promising. Cash flows hit ~$396 per month if I manage myself during the first year I'm not owner occupied. (Cash flow is $42 during the year I'm owner occupant, but considering what I'll save on rent it will actually be closer to $500).

I finally feel confident in the numbers. Do you guys think it's worth pursuing?

Thanks,

Paul

@Account Closed: I haven't made an offer yet. I might consider offering something lower ~$79K and see what they say (do sellers ever get offended because of lowballing?). The property has been on the market for 130 days+

I'll read up on Section 8, but it may not be worth the headache.

@Account Closed: Thanks for running those numbers for me. I was attempting to be very conservative with my CapEx and Repairs at 15% each, I see you have it closer to 6.4%. In your experience was I overestimating?

For an instance the roof was replaced in 2004. Assuming the useful life of a roof is 20 years, I have about 8 years before I need to drop $5K - $10K on a new one. I'd be covered at the 6.4% saving rate ($9,600), but if I were to also have to replace the furnace which was replaced in 1994 that's another $4K and I'd be under. Would an 8%-10% CapEx saving rate be more reasonable?