All Forum Posts by: Bruce Harding

Yep this is a real world perfect example of a deal that will not cash flow after looking at the mortgage side.

I don't have quotes but bet the mortgage would be $10K per month or $120K per year.

My initial conversation before I received the numbers just today was that the property was a 12 cap.   I figured that was too good to be true.

What I am looking for is ultimately cash flow.  The building is C class in a small town.  I have not dont comps yet so  I have too look at that.   

Total rent Jan 2016 was $14985 per month and total rent Dec 2017 was $16155.   Different total in 2 years was $7000 (increase over year 2016).  Looks to be $25 per month per door approximately.

Painting was done in in 2017 and that is why income was down a bit.  $8300 put into painting.

Looking at utilities water is the biggest one.  $500 per month.  I bet units are not metered.  $6000 per year water expense.   To individuall meter would probably cost $24K.

Roving maintenance service of $10K per year.  Total contractor services 2016 was $16K and 2017 was $24K because of painting.

There is something I have never seen before.  A loan to interest expense of $26,000 per year.  I assume that may be interest on the current mortgage ?

Asking price for 23 unit = $1,700,000

2016 NOI 66,966.00 Cap Rt. .039

2017 NOI 63,531.00 Cap Rt. .037

100% Occupancy typically

Sided and roofed last (pitch roof)  1996

Does not look good to me would you agree ?

Older property.  Would have to be inspected but Roof is old.  As is siding.

Have not physically looked at the building.

I am evaluating taking on a partner.   

I don't have the T12 and all the numbers so I am waiting.

To do the deal myself I have $50K cash. I would have to roll over my 401K into my IRA which would give me a total of $350K in that account.

I have Another IRA with $70K and the ability to get a loan against my home of $150K.

But might be easier to get a partner on the deal.

Thinking I probably could use someone with experience in evaluating the deal.  Was pouring over underwriting last night to see how finance and investment people view these deals.   What an eye opener.

I am very aware that I am short on experience and could use someone who could evaluate what reserves would be needed, any repairs that need to be done to the units (new appliances or painting etc..), value add ons etc...

Can't do that yet as I am waiting for the numbers from the private party.

I can buy this privately without a realtor on either side of the deal.  So that is another area where an experienced person would be a huge benefit.  And would be a benefit to all due to savings of tens of thousands of dollars.

Owner financing I think would be the answer.  Not quite sure how owner financing works exactly at this point but I am educating myself and asking questions.

Also going over real deals in the real world that involve underwriting which is teaching me how much I don't know.

Seth that is a great idea.  Had not thought of that.  Hmmmm.......

First time buyer.   I am looking at my first Off Market Mutli from a couple friends who have not put it on market.  They have money and don't need the income.   And they are tired of dealing with it.   It is professionally  managed.

What is the asking price ?

Cap Rate Based on Current Asking Price ?

Pitched or Flat Roof ?

Average Vacancy Rate ?

Management Cost ?

Any major Expenses Coming Up?

Is there a T12 - 12 month profit loss statement ?

A Current Rent Roll

Historical Expenses

Would like to estimate how much remaining useable life on major stuff like Roof, Boiler.

So those are the initial questions I asked.  Did I forget anything ?

I found a property I am looking at.   $1.5MM

25% Down would be $375K

It was suggested to me to speak with the owners (who I know - they are personal friends) about Owner Carry for $250K.

Does this mean A) The $250K is subtracted from the original purchase price and therefore I would have to come up with 25% of $1.25MM  or..

B) Out of the $375K down the owner would carry $250K and I would have to put $175K down on the deal ?

Yeah as I mentioned I certainly question that cap rate.  We shall see........

 Hey that is good advice.   Never thought of it that way.   

Very good question !   That is next.   This just happened today.