All Forum Posts by: Ryan Moore

I have started discussions with lenders to refinance a MF in Phoenix and I was curious about appraisals and the cost incurred by them.

Quick background: There are currently 10 CLOSED listings from the past couple of months on the MLS of other MFs exactly like mine (same build). So it's very easy to see a trend in the going price of my building.

1. Should I be expecting all lenders to be doing the more expensive walk-thru appraisal, or could there be some out there that will charge me less for cheaper alternatives (i.e. drive by, or even just looking at comps on the computer?)
2. Do some lenders ever make appraisals "free" as part of their products?
3. Am I just wasting my time discussing appraisal cost with potential lenders since there are obviously more important aspects of the loans to discuss?

I’ve own a MF property for just over 2 years now and I’m getting ready to start searching for another one. Having the experience that I’ve gained and spending time learning about the financials of owning a rental, I feel pretty good about being able to look over a listing’s presented numbers and recognize anything that doesn’t seem right.

Before I dive back deep into the search process, I wanted to test out my BS radar from a listing and post it here just to make sure there isn’t anything I’m missing. The building for sale is exactly like mine so I’m familiar with many of the standard cost (insurance, taxes, hoa, general repair cost).

The seller list in his remarks that it has a 9.2% cap a couple different times.

First off, the auto generated cap rate from the MLS doesn't even list that, it lists 7.64 based off the numbers entered into the listing.

As far as the numbers entered:

The income ($33,060) minus expenses ($8,965) does not even equal the posted $21,000 NOI. So I don't know how they came to that $21k. That $21k NOI divided by the asking price gets to the posted 7.64 cap.

For listed expenses, the total operating expenses ($8,965) only reflects the 2 entered numbers, HOA ($7,800) and property taxes ($1,165). The expenses do not take any actual repairs into account, nor does it include insurance.

So is my BS radar working ok with the things I pointed out, or am I just missing something and it all makes sense?

I appreciate any input.

 True, I only really plan on using it as a comparison across other properties when searching for a purchase so as long as I'm doing the same thing to them all, it all works out.

In reference to cash-on-cash return, when calculating how much money was invested into the property, should I include any money that came directly from me that I put toward the reserves?  Even if after the first 12 months, the reserves were never touched, should I still include that as money invested?

I would assume yes since it's going to sit there in the reserves, and I will be treating it as if it cannot come back to me personally.  

Perhaps if I'm able to pull out that money invested into the reserves at the end of the 12 months because I was able to inject rental revenue into there, then I would obviously not include it.

When I purchased my first property 2 years ago, a 4-unit MF, 2 of the 4 units went prematurely vacant while the property was under contract.  At the time, I had nothing built into a contract to allow myself to either back out of the contract or renegotiate the property.  I am curious to hear what others put into their contracts to protect themselves when buying a property and tenants just up and leave before closing.  

After I purchased my 4-unit MF a couple years ago, I transferred the deed to my LLC. I may be refinancing sometime in the near future and I was curious if I need to be doing anything with the deed before I apply? Do I need to transfer it back to me personally before trying to get a refinance loan? Or will that not matter?

I appreciate all the input, thank you

I know the thread is a bit old, but thought I'd throw in my 2 cents.  I would not put my money anywhere that I couldn't have access to it.  When there is a vacancy one month, I need that money flowing back from my vacancy account into my checking to cover other expenses.  I wouldn't want it tied up in a CD.  If it were at any point that I was holding onto so much money that I knew I didn't need to touch for a year, then instead of throwing into a CD, I would be pulling that money all together and finding myself the next deal.

I currently use Wells Fargo for my business checking and sub accounts (vacancy, repairs, etc.) and I was considering moving my sub accounts to Ally savings accounts with their 1.6% rate.  I use this method for my personal finances and it's super easy.

However, Ally does not have business accounts and I don't think just opening up accounts under my personal self is the best idea if these funds are to stay within the business.

I'm looking at a property that has 3 individual buildings on one parcel.  For insurance purposes, would all 3 be considered different policies?

I'm looking at a sale of a property that has 3 single family homes on the same parcel.  In regards to property taxes, would each building be taxed or is the parcel itself taxed?