All Forum Posts by: Snehann Kapnadak

@Mike D'Arrigo Got it, thanks for the insight and clarity. 

@Mike D'Arrigo Thanks for the comment. I was thinking about how I could bill back the utilities (electric included) at some point in the coming years in order so lower my expenses and raise the NOI. Do you have any thoughts on whether that plan of action is feasible or not?

@Bryan Feltman Yes I can, and have built doing that in my business plan.

Not a dumb question! Debt service is typically considered separate from the operating expenses. Since there are so many variables with debt terms and negotiating, they're usually calculated on their own. Hope this makes sense.

Thank you all for the replies! Much appreciated.

@Syed H.--Noted on a lot of your suggestions regarding taxes, insurance, trash, and utilities. For Vacancy, I was planning to use 10% but it made more sense to account for 1/4 units being vacant = 25%. For the loan, it wouldn't be commercial since it's a 4-unit. The fee sheet I received from one of my lenders quoted me 5.5%, but if it's lower than that, then great. Same goes for the 30 years. Regarding out of state, I've invested in KC before and have a PM on the ground.

My IRR does account for exit value, exit cap rate, refinance costs, hold period, etc. Also accounts for a 2% annual rent increase and a 2% annual expense increase. CapEx in Year 1 I allocated as $6,288 (~$130 per unit per year or ~more than 1 month's gross income). I didn't think I'd need to use MIRR for a 4plex, but I'll look into it more.

@Michelle Lutz thanks, just replied to you this evening.

@Kevin S. The vacant unit just needs carpet cleaning but then it'll be ready to rent, according to the seller. However I would plan to inspect the unit in more detail during DD and will verify those claims. Yes, I based my underwriting off of full occupancy, which is partly why I allocated a higher percentage for Vacancy allowance (25%). So with a 5.5% interest rate my overall cashflow would be $3,419/year or about $284.94/month. Do you think it's unwise to underwrite for full occupancy? I'm conscious of trying to make a bad deal look good, but the property is located in a good area so I'm hoping I could get it rented out relatively quickly after the vacuuming.

Noted about the taxes. That's what the seller provided for last year so I'd assume they're within range. He's asking for higher than 200K so not sure why they would evaluate it for a lower property value. But I will double check with the tax assessor. Thanks for your advice!

@Dennis M. $2200 with 3 of the units rented, 3K with all 4 rented. Do you think that's too much of a gamble?

@Caleb Heimsoth The reason I mentioned cap rate (and IRR) was to put things into perspective for the sake of getting feedback on my deal but I'm aware that you're right, Cap rate doesn't mean much since it's not commercial. I just think it's easier to analyze it like a MF property since comps can get tricky. Comps for 4plexes in this are are around 200-220K.

For electric, I'm not sure why they paid so much but that's what they told me. I'm looking at it as an opportunity to implement RUBS and raise the NOI on this building down the line. I'm curious to what your thoughts are on that game plan?

Thanks for your feedback!

@Niels Bjørn Toppenberg Ah you're right, I had them in my calculation but forgot to mention them here. Downsides of writing this post last night haha:

CapEx/Repairs: $6,288 (~$130 per unit per year or ~more than 1 month's gross income)

@Robert Fornwalt I used 25% because I was quoted this from a Fee sheet that my lender gave me. It may end up me putting 20% down, but with closing costs and travel costs (I'd like to visit it first) it'll end up being about 25%. Taxes were provided by the seller but I'll see if I can look them up. This is in Kansas City.

@David Taylor Thanks! I have not yet put it into the Calculator, just been using spreadsheets for now as I find them easier to use personally. According to the seller's docs, he's paying that much (not the tenants). But I would like to bill these back to them if I'm able to secure the property.

Hi Everyone, hope all is well. Wanted to get your thoughts on this deal, based on the following terms:

My goal (caveat): 1st MFH deal, looking fora stabilized asset for moderate cash flow. Not looking to do any major value adds and I'm okay with getting moderate returns.

Market: Kansas City, MO

Offer Price: 200,000

ARV, per Seller's financials: 215,000

Income

Gross Rent: $36,600, assuming full occupancy although 1 unit is currently vacant

Vacancy Rate: 25% (I know this is high but it's accounting for 1/4 units being vacant)

Effective Gross Income: $27,450

Expenses

Taxes (from seller): $1,674

Insurance (from seller): $1,434

Lawn Care (from seller): $400

Trash (from seller): 900

Electric (from seller):1,620

Water and Sewer (from seller): $3,356

Legal (my assumption) 1,000

Property Management (my assumption): $2,745 conservatively underwriting to 10%, but will try to negotiate to hopefully 6-7%

Total Expenses: $13,129 (~48% of Gross Income)

NOI: $14,321

Interest Rate: 5.5%

Loan Term: 30 Years

Down payment: 25%

Cap rate: 7.16%

CoC: 6.04%

DCR: 1.4

Plan: Hold for 10 years, Refi in year 6 or 7. Rent increases ~2% per year.

Average Annual Return with Refi: 16.02%

IRR with Refi: 16.02%

Where are my mistakes and where am I not being conservative enough? Thank you in advance for your comments.

Not to hijack the thread but has anyone had luck finding 4-plexes (not specifically for FHA) in the market as a whole? The few that I've seen have sold super quickly.

Hey @Darson Grantham I'm in the same spot with a 4plex that I can't find any comps to. Did you end up offering a lower amount than $154K on your 4plex?

Here's my list, hope it helps! Might have a few repeats:

• BiggerPockets
• Cash Flow Connections
• Old Capital Podcast
• Apartment Building Investing with Michael Blank
• Passive Real Estate Investing
• Wheelbarrow Profits
• Investing in the US with Reed Goosens
• Investing in Real Estate with Clayton Morris--*I know his business is controversial but he and his wife put out solid content on his show.
• The Real Estate CPA Podcast--focus on tax strategies (but it's not as dry as you may think)
• Real Estate Nerds--focus on legal strategies & "the worst deal* (but it's not as dry as you may think)
• The Real Estate Launchpad
• Old Dawg's REI Network--targeted to older demographic but still generally good content
• Joe Fairless's Daily podcast
• Rental Income podcast--focus on mom and pop rentals, not much multifamily-specific but still good.
• Multifamily Legacy Podcast--he rambles sometimes, but tangible content overall

Hey @Alexandra Fisher I'm in NYC too! I invest in Kansas City. Not a lot yet, I just have one SFR, but I'm working on scaling up! I'm happy to help or provide more insight if it's helpful! Feel free to PM me. Good luck!