All Forum Posts by: Page Huyette

I've come across a deal that I could use some help with:

2 acres +/- near active downtown area
small mobile home park with 80% of units owned by landowner
3 small single family homes on lot as well
100% occupancy

asking 995,000
gross rents 80,700
expenses (per agent) about 12k
probably managed by a PM, as they are the listing agent as well.

Owner financing avail (not sure what yet) & willing to carry contract for deed with some down (owner is an agent). Wants to do a 1031 exchange or have interest in partnership development

The most I could put into it would be 40-50k at this time. My rough numbers using the 50% rule look pretty tight but I see some potential with the property location and the single family homes existing on the property.

I don't have 25% to put down on such a large deal, but instead of getting discouraged I thought I'd ask the opinion of some BP folks. How would I structure a deal like this?

@James Vermillion inspired me with his post also. Thanks for the reminder.

Since I read the post, I've spoken with several banks, and what's been really informative is learning the different criteria they all have for the same loan. Some want to say no right away, some say yes then no later, and some even hem and haw without actually saying no.

What I've learned is that there are so many different factors a bank looks at, it's important to learn what they want to see, and then go back and focus on the one that best aligns with your goals. Don't ever give up! There's a little yes buried in there, you just need to keep digging.

Scott, I honestly don't use Freshbooks anymore, but not because I didn't like it. I had an accountant that worked for me and preferred Quickbooks so I went back to that. But I have several colleagues that do all of their invoicing through Freshbooks and swear by it. Especially the .50 fee if you use it a lot. Didn't know about them not liking real estate transactions.

Another option, which is a little more complicated but allows you to use a bunch of payment gateways, is to purchase a reseller hosting account through someone like Hostgator (my current favorite). This is the type of account that allows you to host multiple sites (your own or other peoples site if you want to host others and charge for it) BUT, even if you only host your own site, it comes with WHMCS which is an online system that allows you to set up shopping carts, send invoices and track payments for clients through your website. You then choose the ways you want them to pay (Paypal, Google checkout, bank merchant account,offline payments, etc.) and all transactions are tracked on your personal account.

Probably a bit more than you need, but starter reseller accounts are about $25/month---subtract whatever you pay for your site hosting (should be about $5 a month) and it's probably the same you'd pay for Freshbooks with more capabilities.

Another option for using Paypal is to use Freshbooks,com for your accounting, which allows people to pay via Paypal but only charges a .50 transaction fee, bypassing the entire Paypal percentage fee.

I agree, tile looks fine. Just replace that grout, buy a coordinating shower curtain from Overstock.com with and paint the vanity and trim in a steel gray, like Valspar's Beguile or similar. You can also add a mini-blind in a gray to match if there's a window.

Wells Fargo also offers a rehab loan that will loan 75% of ARV if you can do the repairs and purchase the property for that amount, with 25% down. This is similar to a 203K but without PMI if you can come up with the down.

I would get a licensed contractor to take a good look at it before you even make an offer and look into financing, as it sounds like there could be more work than you might want to take on.

I've added around $170/month for maintenance/repairs for future upgrades. Thanks for your take on this one.

Running the 50% rule shows this vacant REO triplex at a negative cash flow, but when I run a more detailed analysis, it seems fine. I'd appreciate insight on this deal:

Purchase price: 209k max with 25% down

Gross yearly rents: 27,600 (conservative--can rise after rehab)
Vacancy rate: 5%
Prop taxes: 2034
Insurance: 1200
Maintenance/repairs: 1950
Utilities: 1500 (gas/electric for laundry & common hallway, laundry & exterior water) Units separately metered for electric, will be sub-metered for water after purchase

Lawn/snow: 900

I'm showing gross cash flow profit of $6792/year.

I've based rents in-between below-market rents prior to foreclosure from PM leases and current market analysis. Rental market is very strong(both long-term and vacation rentals) and desirable location.

Single water meter high bill is currently $150/month fully occupied with no sub-metering.

We will be the PM, intend to buy and hold min. 5 years, likely longer. Average unimproved, fully rented (at higher rents) comps are average 255-270k in the area, with cap rates between 6.8-7.5%. Units all have separate entrances, about 750-850 sf each. Building is built about 1910. Common laundry area with coin op in place. Have already fully inspected property top to bottom. All appliances and fixtures in good condition, fully functioning.

Improvements will be done prior to renting, either all at once or one unit at a time, with full occupancy in 2 months or much less. Plan to put about 15k into rehab (roof paint, misc clean-up) doing most of work ourselves aside from the roof.

I know the cash flow is not phenomenal, but this seems like a property with the right type of rehab needed, great potential for increased rents. What am I missing?

Can't ever go wrong with that advice, thanks K. Marie.

Update: Went in to bank #2 with a general analysis providing details on what's important to them: rents, taxes, major repairs. Didn't show my own projections on additional items and "what-if" scenarios that I've run so the deal meets my own parameters. Am now talking to them and 3rd lender, so we'll see where this goes.

I still find it fascinating, whether it's real estate on another venture, it often comes down to the individual you are dealing with and whether they want to put forth the effor or not. So many want to say no so you'll just go away and make their day easier, but there's always someone out there happy to help you see if the deal will fly if you dig deep enough. It's about relationships and building a network.

For example: Today I was talking to bank #3 about a rehab loan, and was told I needed to have 2 years of income tax showing rental income (for any property) to allow 75% of gross rents to be thrown into the mix. After a quick head scratch, I went to someone else at the bank and asked if two years rental income Schedule E from '09 and '10 would suffice to show experience--lo and behold it would.

One day it's up, the next it's down, but I keep on truckin'. Every day brings a new real estate adventure. The lesson: don't take someone else's no for an answer, only your own.