All Forum Posts by: Sam Edelson

Thanks Greg & Mack. Really appreciate the feedback and glad to hear no obvious red flags.

• I should have been more clear. The 5.5% does not include majority of direct labor, which lumped in expenses
• Thanks for the tip on insurance, maybe I will get a few new quotes. I will also need to explore the potential of a property tax hike
• I'll increase the reserve capex per unit
• Vacancy rate shouldn't be an issue but good to know. May come into play if I try to raise rents...
• I had heard about aluminum wiring but the circuit panel is new to me. Looks like ~$2k/panel?

I am relatively novice and looking at a Class C multifamily complex in a MCOL city (Philadelphia, Denver, Minneapolis, Columbus). Quick stats:

• ~30 units
• Safe, low crime, stable neighborhood, but not trendy. Building was built in late 1960s, appears well-maintained (obviously I could be wrong - I need a full inspection)
• Rent is ~$875 for a 1br and $950 for a 2br (probably 5-10% below market)
• Very low renter turnover - one or two units per year. Minimal vacancies 
• I have full financials from current property manager. Average over last three years - $330K revenue and $170K net income / year (NI reflects taxes, 5.5% management fee...pretty much everything except debt servicing costs. Also includes reserves of $200/unit/year).
• Based on sale comps, similar building have sold for $80k/unit or $2.4M
• Assuming comps reflect eventual sale price (big assumption), cap rate of ~7%. 

Two questions for the smart minds here:

• Based off the info above, would anything make you run away from this opportunity?
• Based on my research it seems I could put 20-25% down with a Freddie Mac small balance loan. For those who have gone down this path, is that actually feasible? Seems fees can be quite high? And need to hit the net worth hurdle.

Thanks! Happy to answer any questions