All Forum Posts by: Steven Barr

Is it common for a management company to charge a "finder's fee" equal to first month's rent for every new tenant they place in your property?

With a force appreciation strategy (like raising rents heavily over the course of a year and then selling quickly), I feel like there will be a lot of turnover, and then it makes it impossible to service the debt for that 1 month that there is no rental income. I realize not all the leases end at the same time, but still seems like it would make this strategy difficult 

Thanks for the input!

I am looking to bring on a private investor for an apartment deal. However, I need to understand how to pay them out before I do so.

Example.... I put my own money down, and then use their money as well to buy a bigger apartment. We buy the apartment for $2mm, raise rents, and then make $500k on the appreciation.

We agree they get a % of the gain. I would like to 1031 my profits into the next deal. If they want to cash out,  can I just cut them a check and 1031 my portion? If so, are they then responsible for paying their own taxes after check is cut, or am I somehow involved in the tax payment process?

Trying to buy first rental property. Does anyone have a lender that will supply a non-owner occupied investment property loan with 20% down payment on a 4-plex? Willing to take less favorable terms to receive the 20% down 

Thanks so much!

One caveat is that there is a garage being rented out under the table. If we got this unit city approved, it would then be a 5-unit. Do you know how that would affect our ability to sell bc it would now be a commercial 5+unit? Also, would that affect our loan at all, given it would be a residential loan?

Current rents on 4-plex are $750, $750, $750, $750. They have rehabbed and are claiming market rents are now $950, $950, $1100, and $1100. With 25% down payment and current rates, it is currently being sold for a CoC return of 2.74% with current rents. If you raised rents to the new claimed market value after rehab, the CoC return is now 8.16%, with the valuation of the property now being $100k more than it was purchased for.

My question is... why would they have rehabbed the property and then not raised the rents themselves? There's $100k of value being left on the table. I would like to take advantage of this, but scared I am missing something?

@Ned Carey I am new to RE investing and just trying to learn the ins and outs. Thanks for the reply!

Ex: $2,000,000 15 unit apartment with gross income of $270,000. NOI after 40% expenses is $162,000. Cashflow after debt service of $120,000 is $42,000. Cap rate is about 8% in this example. CoC return is 8.4% (assuming 25% down)

If you purchased this for the $2,000,000 price and then raised gross income from rents to $324,000. NOI after 40% expenses is $194,000. Cashflow after debt service of $120,000 is $74,000. Coc return is 14.8% (assuming 25% down)

If we assume this is truly an 8% cap rate area... did you really raise the value of this property to $2,425,000?

Also, if you wanted your buyer to receive an 8% CoC return with 25% down, wouldn't you be able to now sell this for $3,700,000 with the new cashflow?

What am I looking at correctly? What am I looking at incorrectly? I am a newbie so PLEASE feel free to tear this up. Thanks guys!!!

Are you required to use an in-state lender for commercial multifamily RE? Or can you use an out-of-state lender?

I am trying to get my hands around how to value a rental property based on all the metrics (NOI, cap rate, expenses, etc..)

Ex: A 4-plex listed for $700,000. Gross income is $65,000 so roughly $1350 per unit average rent. Expenses are calculated roughly $26,000 (40%). This brings NOI to $39,000. Debt service is calculated to roughly $30,000 per year with 20% down, so cash flow is $9,000 per year.

Cap rate in this example would be $39,000/$700,000 = 5.57% 

Question #1: How would I accurately value this property if I were purchasing? Does every AREA have its own cap rate, or is it by individual building? If by area, how would you find that area's cap rate? Because if it is a 7% cap area, then the value of this property would be $39,000/.07 = $557,000. 

Question #2: Say I buy the property for the current asking price of $700,000. I then increase the rents to $1600 per unit which increases NOI to $51,000. With everything else remaining the same, what would be the new value of the property?

If the cap rate was 5.57%, I just increased the property's value to roughly $915,000 ($51,000/5.57%). However, if it was a 7% cap area, then I just increased the property's value to roughly $730,000 ($51,000/7%). 

Thanks guys!!

@Charles Carillo 

Thanks for the insight! Good to know it's at least possible