All Forum Posts by: Ricky Brown

@Gregg Pauly I really appreciate the resources. I will definitely be checking this out. Is the book available on BP? I will search for it and I'm sure there are more things to study on here when I have time to really dig in. 

@Dan Genzel this is an area I definitely have to work on. Being new in investing, I don't yet have a good network for my business. I am working in my financials/credit to get myself into a better position to work with lenders, a well as learning good property analysis to use asset based lending efficiently. 

Thanks for lending in on my education

Thanks everyone. I am working myself into doing more analysis everyday. I don't have a great understanding about certain costs yet and not sure where to get the accurate data for the different buildings, but I am learning. How do you determine the class of the apartment? That is referring to the type of tenant, correct? Is it based on what rent will bring for that area and building? 

I have listened to Grant Cardone and have a few of his books. I knew about his apartment investing, but I was unaware of the YouTube channel dedicated to it. I will definitely be checking that out. I have found some training on commercial real estate and doing CMA's and valuing property accurately. I am learning and practicing all I can in that area as I go. Are there any guides or books that really do good at explaining everything in detail that I could pick up and study?

I really appreciate everyone for your input. 

Thanks @James A. I was actually doing that math right after posting this and noticed that it is pretty low for that price. I am not sure what the typical cap rate is around here, but that seemed really low, which is most likely the reason it has been on the market for a while. I noticed it has been active for over 300 days. Here are the numbers from the P&L sheet that he sent me. It shows that there was some HVAC work done and a lot spent on interest expense. Would that interest expense be calculated into the NOI when finding the cap rate? Is there anything else you notice about the numbers that maybe shouldn't be there or look out of place?

Rental Income                   97,308.33              99.5%

Total Income                     97,813.33            100.0%

Expenses

1155 Crawford Supplies            1,395.85               1.4%

Carpet Cleanings                          145.00               0.1%

Dumpster Rental                             59.78               0.1%

HVAC                                        10,188.30            10.4%

Insurance                                    6,099.35              6.2%

Interest Expense                       19,672.53            20.1%

Labor                                           9,644.56              9.9%

Legal and Professional Fees          500.00              0.5%

Licenses and Permits                       25.00              0.0%

Mgt Fee                                        1,600.00             1.6% (although it says he managed it                                                                                                              personally)

Office Supplies                                  50.00              0.1%

Pest Control                                     800.00             0.8%

Property Tax Expense                  4,369.76              4.5%

Rent                                                 155.00              0.2% (not sure what this is for)

Rental Equipment                             222.92              0.2%

Repairs and Maintenance              5,929.69              6.1%

Supplies and Materials                  8,867.40              9.1%

Utilities                                           6,270.92               6.4%

Total Expense                              75,996.06             77.7%

Net Ordinary Income                    21,817.27             22.3%

Cap Rate at asking price of           $899,900             2.42%

I did some PVA searching and found the assessed value to be at $543,171 which would put taxes at $6092.75 for the year. Being generous, if the assessed value went up after purchase to $700,000 that would make the taxes $7851.90. Based on what he did that was labeled Labor, Repairs & Maintenance, Supplies & Materials, Mgt. Fees, or Crawford Supplies, it costed $27,435 and then an additional $19, 672 for interest expense, which really would raise the cost of the expenses for the year. I didn't thing the cost of the financing was added into the calculation.

Here is what I was thinking about some round about numbers for projected expenses. All the rents are different values even though all the units are the same, 2 beds 1.5 baths. maybe some of them are in worse shape and based on some pictures, some units might have window AC units.

Rent Income                          ~ $98,940          ($8245 mo)

Insurance                               ~   $6100

Taxes                                     ~   $7860           (Can this be reduced using deductions?)

10% management                 ~   $9800

10% Repairs                          ~   $9800

10% Cap. Ex.                         ~   $9800

Utilities                                   ~    $6270

Legal Fees                             ~      $500

Permits                                  ~        $30

Pest Control                          ~     $1000

Total Expenses                     ~ $51,160

Annual NOI ~ $47,780

Cap Rate ~ 5.30% (based on asking price of $899,900)

Cap Rate ~ 6.83% (based on a purchase price of $700,00)

Do these numbers make more sense? Or what am I missing (besides the closing and cost of the loan)? Is there anything that really looks off or wrong with the numbers that he provided? I don't understand what some of the numbers are for. 

I really appreciate the time to work through this with me and help me understand better. Even if this deal doesn't work out for me, I really like the opportunity to analyze a property like this to understand better. 

Hey Bigger Pockets friends,

I have heard many stories about people getting into rental investing through apartment complexes and would like to acquire a few myself. I have listened to many podcast and read similar stories of people practically stumbling into apartments and getting the financing for the deal through various means, like private money lenders, commercial loans, seller financing, etc... I am looking at a few apartments right now in my area that I would like to get as my first apartment complexes and would like to hear what other experts have to say about how to get the financing for the deal and how to make a good analysis of the property to make sure that I am not missing anything.

First, the property is 18 units in 3 buildings. I received the profit and loss standard sheet for the year 2015 and looking to get an updated one for last year. It looks like the property is netting a little over $21,000 a year after all expenses with total income being $97,813 gross and no additional income from other sources. I am doing all the research I can to analyze the deal but I am having some trouble getting many comps for properties like this due to my town being pretty small and not having a lot to go on. I also received a rent roll statement for last October when I first contacted the person selling the property. It showed $8,245 in rent for the month, with 100% occupancy rate at the time and a payment of $2500 for the month. He said the units stay full most of the time due to high demand for rental units in the area. Rents are between $300 and $550 a month, depending on the unit I assume. Most are month to month basis and some have a lease in place. Property taxes are showing about $4400 for the 2015 year and insurance running $6100 for the year. It shows a management fee of $1600 for the year (which seems lower that what I would have expected) and a maintenance and repair cost of $5,929 and material and supplies for $8,867. There is a list of all the expenses for 2015 included on the profit and loss sheet as well. I'm not sure how I could upload the PDF of the P&L sheet, but if that's possible, I can do that for extra help showing the expenses. 

The listing price is at $899,000 and the agent says that the seller is motivated and make an offer. I am not sure where to get financing for something like this and do not currently have a down payment for a loan. I am open to any suggestions to get the financing and possibly a second loan, or private money or something, to cover the down pay. I have contacted the agent about the seller financing and if he has any options for funding the deal. The price seems a little steep in my opinion, however, I am not really experienced in valuing apartments like this and that's why I am here asking for assistance. How do I compare the cap rate if there are no other like-properties around to compare it with?

I really appreciate all your time and help in advance. I have been studying real estate investing a little while now and I'm ready to jump in and get some units under my belt. I have one so far and became a Realtor to accelerate my progress. I would like to turn this into a great success story of how I got started investing in apartments and I believe I can make it happen with the proper guidance. Any help is greatly appreciated. Thanks much.

Ricky Brown