All Forum Posts by: Sean Pincus

The unit breakdown is 1 on the first, 2 on the second, 1 on the third.

If I run 4 supplies and one central return it might start eating into a lot of unit space. 

I budgeted about 20k for the material and labor. 

It's a quadplex with separate gas meters, separate electric meters, and separate water heaters, and only one forced heating system. 

- Is there a more cost effective way to distribute heat and a/c to the units individually?

- If it MUST stay as one utility meter and I do have separate zones for the heating then how do I make the tenants pay for that fairly? (it seems to me I would get complaints that people are using more and some are using less)

I am in the midst of putting an offer on a multifamily house. I am wondering what everyone is doing in regards to HVAC systems. I am going to gut the house and redo it all, but I want to add HVAC. 

Is everyone putting in an air handler for each unit? 

It seems extremely costly if I were to run separate ductwork and supply and returns for each unit... can someone walk me through how they're making this work.

Thanks,

Sean

I bought my first property when I was 26. I gutted the entire house and completely renovated it by myself on nights and weekends. It now cash flows $607/month and I have about $93k of equity in the property from the appraisal due to renovations. 

This is both on and off topic... I love excel and most people do not know about this function:

If you're doing a month by month excel sheet you can show the amount of the principal and the amount of the interest paid without an amortization table

Principal: Function is "=CUMPRINC()"

Interest: Function is "=CUMIPMT()"

You can then specify the # of periods and the start and stop time. That way you know how much interested you paid and in what months. It can be a bit confusing until you play around with it. 

Eric, the big issue with buying it under one persons name and then transferring it to the LLC after the fact is that you will be paying transfer taxes twice (depending on where you live that could be quite a lot of money).

Why can't they just buy the property originally under the LLC? As long as they are able to put up the down payment money I can't see a bank having a hard time with the deal...

Dave,

Here is a few things you can try:

1. You can talk to a few commercial leasing agents about rent comps in the market and also the potential cap rate on that type of structure.

Cap Rate Breakdown (very high level):

Retail Cap Rate: 4.5% - 7% (depends on the credit of the tenant... example: McDonalds trades at a 4% cap, while PNC & Wegmans trade at about a 5.5% cap)
Apartment Cap Rate: 5.5% - 7% (depends on the condition and vacancy %)
Office Cap Rate: 8% - 10% (depends on the condition of the building and the credit of the tenant)

2. Call CoStar

- They are the experts when it comes to compiled information on commercial real estate.

3. Broker's Opinion of Price

4. If you really are interested in the property, ask the seller if you can put it under option. Once under option you can begin to approach tenants about the space to see what they are willing to pay. Send out Letters of Intent to tenants-- you will quickly see what the market commands. 

Sydney, 

That is great advice. My father actually loaned me money in the same manner to complete my first rental property deal (he received nothing from the deal). He did not want anything out of this deal either, but I insisted because of what he did for me the first time around. I paid him back with a cash-out refinance. This time I will live in the property and cover the expenses until it can be sold. 

I will reach out to an attorney and see what we can put together. As for the LLC, we won't be doing that because I have to buy the property under my own name to qualify for the First Look Initative from FNMA.

Thanks!

Well, Ken.. it's not as simple as 90 - 100k in profit. To get the property in cash, I essentially have to borrow the funds from my father and borrow the renovation funds from my father. He also wants to be apart of the deal. I would split profit with him 50/50. 

House Sells: $260,000

Less Profit: $47,000 (or 23,500 for me)

Less Cost of Purchase: - $5,981 (I have to pay both sides of the transfer tax and other closing costs)

Less Cost of Repair: -$67,500

Less Carry Costs: - -$11,438 (Taxes, Insurance, Utilities, and Interest on Inter-Family Loan)

Less Cost of Sale: - $23,400 (6% Commission and Transfer Tax)

That Leaves me Roughly with a Purchase Price of $105,000

If I sold it for $275,000 it would turn my profit into $60,500 roughly (or 30,250) for me

What do we think now?

I have the following deal outside in the suburbs of Bucks County that I am considering... please let me know if you think this is worth it. 

Subject Property - $105,000 (cash)

Renovation - $70,000 (cash)

After Repair Value - $260,000 - $275,000 (could be more depending upon the finishes)

Here is where it gets tricky...

- Holding Period: 1 Year

- Renovation Time Frame: 3 - 4 Months

I would buy this property under the FNMA guidelines of the First Look Initiative which allows Owner Occupants the first "stab" at purchasing the property before Investors. 

I will indeed live in the property and own it for 1 year before I 'flip' it, so I would not be in violations of the First Look guidelines.

Is the above deal still worth it given I have to wait 12 months before it can be sold? 

Thanks,

Sean