All Forum Posts by: Peter Mason

The new interlocking floating vinyl all day long! Have had it in mine for 4 years without an issue. If one gets scratched, use a hair dryer to unlock it and replace. Looks good too with the new products they have. Yeah carpet smells nice and new for a few months until tenants get that dog and cat they say they don't have and start cooking pork fat every day.

I don't think there's a bubble either. As everyone else said the lending requirements are still pretty tight. I do however think real estate (at least where I am) is peaking out or will peak out very soon. It has shot up quick and inventory is low now. People are snatching up properties sight unseen down here as soon as they hit the market out of fear there won't be any left to buy. Realtors are overpricing their stuff because of this. It's crazy. I think the market will level out here real soon and possibly dip a bit. If you plan on riding this appreciation train you better do it quick. Analysts say 2 years for stabilization from the Brexit thing and we've got a disturbing election coming up. Watch yourselves out there!

Originally posted by @Jeff Copeland:

I don't think a new HVAC, by itself, is justification for a rent increase - tenants don't care how old it is or what it looks like...they only care if it works.

The capital investment would presumably increase the resale value by decreasing potential capex for a future owner...but isn't direct justification for a rent increase.

I think the most important question is how much of a spread is there between current rents and market rent (which is increasingly rapidly)? 

Assuming you'll see a majority of tenants turn over (or see their rent increased) within two years...That is where you will see your value increase; by improving the cap rate. Landlords don't care how old it is or what it looks like - they only care if the numbers work.

 I agree with your assessment completely. The only reason I say justification for increased rents is due to the fact that it would be lower their utility bill. I will agree that most don't care though. Maybe its more of a justification for me.

True, actual life can be longer as I have had rentals with literally 30+ year old HVACs. But I feel like I have to assume the worst when analyzing as a prospective investment. 

I can tell you that having to replace those HVAC's makes the numbers not add up in the short term (1-3 years). However it will add value and would be further justification to increase rent and will improve resale value. But there lies the problem....am I pushing it?

Need some help from some people in the know about Saint Petersburg. Feel free to chime in even if your not. I'm under contract for a 9 unit building in St. Pete that I've crunched the numbers on. There is good potential for added value and rents are below market. I'm gonna try to keep this short and sweet numbers wise. Trust me when I tell you I have done the due diligence Cash flow will be approx $7,000/year ROI w/equity will be approx 11% ROI cash on cash before taxes approx 6% For year one we are at the minimum limit for debt to coverage ratio at 1.33, year 2 with increased rents shows 1.6. This is all after a price reduction from $490k to $470k and a 5% more down payment to make bank happy. Point is we are stretched to the limits for the bank. I just had the inspection today. Everything is acceptable except that 8 of the 9 HVACs are 14 yeas old. Typical life span is 15 years. The cost to replace is approx $3,000 to replace each if I'm lucky. My exit strategy is to improve, increase rents and stabilize then sell...roughly 2 years. If I have to replace ACs it kills everything. The only reason I am still contemplating buying this property is because multifamily apartment buildings have been FLYING off the shelf here. Like under contract within a week of listing. I don't know if I should keep pursuing this. The decision is gonna be based on market I think. Any ideas?

I doubt you would loose your house. I've purchased a property like this. Put a down payment (much less than what your getting, just 5%) on it while my other property was on the MLS. We structured the deal as a lease option to buy in 6 months or less so that as soon as the property closed he got paid. I gave him the option of putting a second mortgage on the property I was selling so that he would be assured money was going to him first before me. He didn't do that but it is an option for you. Of course you'd want to make sure she has no leans on her property and that you'd actually get your money after her sale. I'd sell to someone like this in the future if due diligence said I'd get my money. Your gonna make more money from the interest your getting obviously.

I purchased Landlords Cash Flow Analyzer Pro a while back and just started using it in depth on apartment buildings I am looking at. Its all excel based with macros and really well done. I'm a little lazy and didn't feel like or have the time to hammer out my own. It was created by a investor/CPA and gets into the the details that you would typically not think about like cash on cash before and after taxes, modified internal rate of return etc. It also has many features such goal seeking (what you should pay based on your goal), the ability to create a report, partner features, and lots of other stuff. It shed some light on properties I already had that I plugged in there. Unfortunately it gives you the brutal honesty for the hings you never think about and it may change your perspective on a property. 

whoops I meant feasibility study time. 

Any idea what a good feasabilty study time I should offer? Its my first MF and I am trying to come up with an offer. I understand this is usually a point of contention between buyer and seller .Any suggestions?