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All Forum Posts by: Russ McKelvey

Russ McKelvey has started 14 posts and replied 43 times.

Post: Raising Rents on New 4 Plex in Colorado

Russ McKelveyPosted
  • Investor
  • Parker, CO
  • Posts 44
  • Votes 7

Hello BP.

We close on a 4 Plex in Colorado Springs on Friday 28 JUN 13. The appraiser and agent both think we need to raise rents from $800.00 a month to 850 or 900 a month based on market rates.

Three tenants are on month to month leases. How much notice is required and how to the notices need to be delivered to comply with Colorado Law?

Any other advice from seasoned Colorado investors?

Thank you for your time.

Post: BiggerPockets Summit 2013 - Tentative Dates

Russ McKelveyPosted
  • Investor
  • Parker, CO
  • Posts 44
  • Votes 7

We are in.

@Will Barnard

Thanks. I will look at the highest and best use. I looked the property up on teh tax assessors page: http://land.elpasoco.com/ScheduleDisplay.aspx?schd=6417201008

it only has one parcel number but has the buidlings listed seperatley.

Lists victorian as single family and other building as Duplex/triplex. I will hit the city zoning office at lunch tomorrow.

DAY 2 Update:

Scheduled the inspection for 21 MAR 13. Also checked the assessors office. They said this May they will assess values again. Looks like with the last appraisal and this purchase price I will be able to reduce the tax assessment almost 40%.

Checked a the Taxes for 2012 have not been paid 1706.00. Is this normally taken care of by title company or do I need to make sure I stipulate it with the seller. There were no leins at the recorder's office.

The utility company will not release the historical data to me only the seller so I have requested last two years. Did confirm all utilities seperate except for water/sewer in the duplex/triplex building.

Does it make sense to get a sewer scoping. Is there anything else I can do during teh due diligence phae that can help me negotiate a better deal to improve the 1% mark I am at.

Thank everyone for the help.

@ Will I will visit the zoning office tomorrow and see what they have to say.

What is an APN Lot? On the tax assessors web page it says duplex/triplex but is zoned R2. I am assuming they are tracking the victorian as a third unit. We will see what they say.

Also, what is a highest and best use? Is this like an appraisal to determine the best use of the property and market rents.

There are two appraisals that have estimated the rents could be 2550 last about 1.5 years ago. PM has not raised rents in a long time. This puts it a bit over 1%, not great, but I like that I can live in the Victorian and manage the other building.

I am a concerned about the foundation of the victorian because it is rock and I do not know anything about them.

Everything has seperate meters except water. Water is billed seperate for each building but not seperately metered in the DUPLEX/TRIPLEX.

@Pat: We are being a bit extra careful with inspections, we will owner occupy for a year or two based on it being a VA loan and have two small kids. I saw some spray paint one a wall in the victorian. Tenant has been there 8 years but said those before hime were "weird." Spray paint looked liek a dragon. So I thought I should at least check it out. I am eager to get started but dont want to lose my butt on our first property either.

@ Michael

The property has two seperate buidlings. The victorian is a stand alone. The second building is zoned Duplex but was built as a fourplex. basement levels are finished with their own kitchen and laundry rooms. Property Manager has been renting out the upstairs and basement units of the north side and then the south side all as one unit.

So three units in one building and a single family unit for total of four.

Who should I see about the zoning, the planning office?

Roofs were replaced in JAN 2013 on both buildings and one garage.

So after a year of reading everything I could on BP. We finally found a MFH meeting our criteria and are in contract. The proprty is in Colorado Springs, near downtown and Memorial Hospital and has a Single Family Victorian, and a Fourplex (Zoned Duplex Though), with a two-car and a one-car detached garage.

I hope to post here as we go through due diligence to track our experience for the next newbie that takes the leap. I also hope to learn from teh advice of experienced vets of MFH along the way.

Current rents seem low so I think I can do much better. Was owned by an estate and rep of estate was in CA and never even saw the property. Tax Records show being taxed at a 359K value and my Fire Policy quote indicated a 525K rebuild cost. Victorian was built in 1892 and Fourplex in 1955. all buildings and garages have new roofs put in Jan 2013.

We are contracted at 235K. Current rents: Unit 1 (3/1/1600 Sq FT): 750, Unit 2 (2/1/840 Sqft) 575, Unit 3 (1/1/720) 375 and the SFH Victorian is a 2/1/1200sqft at 625 (tenants in place 8 years.)

I am starting the due diligence phase and hoping to get some advice. Currently scheduling inspector for Thursday 21 April 2013, also scheduling a mould and meth residue assessment, hopefully for Thursday as well.

I got my Fire Policy Quote today, much higher than I expected: $1960 a year.

What else should I be digging into?

[b]Hello BP. I have been nearly obsessive about reading this site and have begun to look for a deal. I have about 250K remianing in a VA Loan guarantee so have been looking for a 4plex in that price range with a unit large enough for me to owner occupy.

Found a 4plex that has been listed for 715 days at 250K. Upon inquiring, the agent said the owner has had it for ten years along woth several other 4plexes. They have sold all but this one and are looking to retire from property management. Said no offers have been made since listing. I asked if the owner was flexible, and he said he is unsure because there have been no offers but whenever he discusses dropping the price owner says he is good waiting on an offer because of the good cash flow.

In my research, this property is paid off, has a 1 year old roof, and 3 of 4 units have 1 year old furnaces. Also looks like he is underpriced on rents as after comparing to 20 other listings average rent/SF in similar area would make these units rent about 50-75$ higher each. All units were 6 months and now month to month.

Here are the numbers I came up with have not yet recieved Schedule E or Rent Roll:

Potential Income : 26,400 - (8% vacancy 2112) = 24288 (using current rents)

Expenses: Tax 1309 (verified at asessor), Insurance 1819 (today's quote), Water 2880, Trash 1200, Lawn and Grounds 500, Repairs/Maintenance (assumed 10%) TOTAL: 9148

NOI: 15140

If I use VA the loan will cost me 1% for VA funding fee, and about 3K to close so I will assume 10 K to be safe.

If he will take 220000 for it, loan will cost me 12,449/year leaving 2,691 in cash flow.

CoC Yield: 2691/8000 =34% CAP Rate: 7%

What else do I need to consider? What questions should I be asking the seller before going to look through? Are my vacancy and maintenance estimates too low, too high?

Additional Info: Insurance high due to recent Colorado Wildfires, USAA stated replacement value at 425,000.

Property is in great location, but on a 3 lane road, which kind of sucks. 4016 SQFT.

Bottom Line: What would you offer for this property? Thank you.

Post: How can I get a better response rate??

Russ McKelveyPosted
  • Investor
  • Parker, CO
  • Posts 44
  • Votes 7

Another technique in copy writing is to make sure you address what they want. I am new to RE but not to writing. @ J Scott is on the money about getting the envelope open. I, being an out of state home owner, might continue to read if it addressed some emotion I have about that house. Maybe just an opener like:

Dear ___, What would you really like to do with your out of state property? Many of my clients knew they wanted to sell, but didn't have success due to (top 3 reasons cant sell). I specialize in these scenarios. Contact me and see if we can help you get out from under that mortgage.