All Forum Posts by: Paul Stern

@Millie D.  I received two more commitments from local (midwest) banks. one was 4.0% and the other was 3.95% 

One more bank and then I can choose the one for me.

All of these banks are requiring 20% down, 5 year balloon with 20 yr. amort. I have pretty good credit so that seems to help. Good luck

one quote in at 4.25. I have three others working on this. Let you know what they say. 

I am looking now for two 6-units on a single property. Verbal commitments from local banks in the Midwest are 4.0-4.25. Some of my colleagues are telling me they have gotten 3.75-3.9 for larger MF deals recently. 5/20 with 75-80% ltv. I should have 3-4 commitments in the next week and can update my post with that.

@Brandon Hall thank you for doing some research and asking other experts. At first read I agree with your assessment. I just received my 2014 return for review. This should be a great topic for discussion with my accountant. And timely. Maybe we can accrue these before submitting to the IRS. 

@Brandon Hall I am using cash method.

I had a new hvac system installed in 2014. I depreciated a portion of the asset according to MACRS. Now, in 2015 I received a rebate for the HVAC system. Any thoughts on how to handle this in my books and tax wise? Thanks!

@Roy N. @Brett Snodgrass @Ramon Jenkins I hear you loud and clear. I should have this done by next weekend and let you know what happens. 

@Brett Snodgrass  that is great advice. I have debated this quite a lot. For my 4-plex I hired an inspector. He got about $1000 concessions on the deal, and I found other things that needed to be repaired. I have decided not to get an inspector for this deal. Funny part, is all comments I see about inspectors is around horror stories from not getting them. I wonder if anyone has any good stories they would like to share.

@Brandon Hicks  you had a great suggestion. Maybe you have done this before... I got the deal. Feel free to provide more insight on my new posting about this deal:

My first REO-here we go

@Brandon Turner  I started with the community's calculator. It is great. Being an engineer I wanted to really understand the math behind it, so I created an excel version. I added some things to it, so wanted to know if you would like a copy. Maybe potential adds to the already very good calculator on BP.

It has been an exciting week. My w-2 job takes 10 hours a day so I have the other 14 for family, investing, managing, etc. When a good deal shows up, the order for those other activities takes a different precedence. On Monday a 12-unit two building multi-family showed up on Loopnet. Its an REO, two 6-plexes with 40% vacancy, only 2 of 5 vacancies are rent ready (~$20k repairs needed for the other 3) and unknown operating expenses. There are a couple of gems hidden in all that uncertainty. Rents are below market, estimated expenses seem pretty high, per unit cost with repairs considered ($25k) are $10k below the next best deals I could find. To put it in perspective, my first deal closed last June (4-plex) per unit cost was $37.5k and cash flows $800/month.

Found out yesterday my offer was accepted. There was one offer already, so I offered $7k over asking price. When the bank came back and asked for my highest and best offer I added $212 (probably just overbid myself to get my lucky number (12) into the deal :). Due diligence starts now. I have quotes out to get vendors lined up and better handle on expenses.

I am going for conventional financing with my bank also financing 80% of repairs (back to me at closing). Total project cost is $300k, $70k cash needed. Current gross income $74k, Estimated Expense with 10% Vacancy $47K (monthly cash flow is $770). Gross income at market rate $82.1 with same expenses gives monthly cash flow of $1,500.  Cap rate goes from 10% (purchase estimate)  to 13% (proforma)

First things first, I will bring rents up to market (maybe turn over some undesirable tenants). Next will be closing vacancies in rent ready units. I work in a seasonal business and by closing some of my colleagues will be available to help me make repairs. I have lined up a carpenter. Monday I talk to a carpet layer. I still need to find a good handyman and someone for windows, so I am getting the word out to my friends at work and my REI network.

What are your thoughts? Been in a similar situation, do you have any suggestions on how you handled the deal?