All Forum Posts by: Sean H.

Hello BP Community,

I have analyzed this deal myself (using calculator!!) and it does not look like the right deal for me and my investing objectives.However, this is the first multi-unit I have seriously looked at and want to make sure I am making some of the correct assumptions; which are below. Maybe I am being too conservative in some of my estimates or even forgetting something big.If anyone has any suggestions or things I should look at differently, I appreciate the input!

The property is a 5 unit building with the following information:

• Rental income is $4,000 per month or $48,000 per year total
• Taxes are $375 per month or $4,500 per year (this is higher than current but factoring in that they will increase)
• Estimated insurance is $200 per month or $2,400 per year

Expenses:

• Vacancy 8%
• Management 10%

Other expenses

• Landlord pays water at $400 per month or $4,800 per year
  • Realize this could be a cost savings in the future, but want to analyze as is
• General maintenance (including minor repairs on property) including grass and pest control estimate at $300 per month or $3,600 per year
• Capital reserves for Cap ex (appliances, windows (52 windows on building), roof, siding, etc. which I based on building a capitalization table based on useful life of items and number of units) at $460 per month or $5,520 per year

Loan:

• All in after down payment the loan would be for $300,000
• Assuming 7% interest rate
• Amortized over 20 years
• Thus comes out to $2,325 per month or $27,900 per year

Summary

• Income Per Year:$48,000
• Property Exp. Per Year:(-$6,900)
• Expenses Per Year:(-$8,640)
• Other Exp. Per Year:(-$13,920)
• Debt Service Per Year:(-$27,900)
• Total per Year:(-$9,360)

Done! Very interesting!!

Two ideas you should explore. 1) do some homework on a delayed financing exemption. Lots of post or listen to BP podcast #233. Good option if you purchased at a discount, you did not do any repairs to the house (as you can only get back as much as you paid for the house) and you purchases somewhere around 80% of appraised value; because again you can only get out up to what you paid. 2) If the house is worth significantly more than you paid or you put a lot of repair cost; look at doing a cash out refinance. Typically need to wait 6 months (season) but then can get out 75-80% of appraised value. Hope this helps and good luck!!

Starting the process of buying a property in KC area. One thing I have identified is that the lender and title company's fees, points, etc. can have a big impact on overall success of the deal. Any recommendations for lenders/title company that work well with investors on properties that are less or more than $100k?

Welcome Pat! If you are interested in learning more, I suggest doing a search for real estate clubs in the area. TRIG and PREIA are two of the local clubs. Also, if you are looking for another book...suggest "4 hour work week". Good luck!

Welcome to BP. Highly recommend the podcast. Great listen and very helpful!

Thomas feel free to PM me for who I used on my loan. It has been about 6 years since I went through mine, so a few things could have changed....but things you have to take into account is that I had to get 2 bids from the contractor and there are only certain contractors that will work on these. If I remember correctly, the contractor only got paid half to start and then the rest once the repairs were approved.

Welcome to BP! Actually did a 203k loan for my primary. Little more paperwork, but worked out well.

With your 2 units and 2 flips, and maybe a primary residence...how many mortgages do you have? If you have more than 4, I believe that is when the banks start to require you to put down 25%. Not because the house is a duplex; up to four units are considered residential.

I use last pass and it works great. Only problem is that the add in that lest you work directly from the browser does not currently work on Microsoft Edge for Windows 10.