All Forum Posts by: Steven Lewis

@Steven Lewis Congrats! If you pull 80% of the cash out, Does the property still cash flow? If so, there is zero reason for you to leave the cash in the deal. I always tell people to look at the deal this way, the cash you have in a deal at Closing on day one is basically prepaid rent that you loaned your tenants and they are paying you back in monthly increments until you hit the break-even point of zero out of pocket dollars in the deal. You don't see true cash-flow or profit on a deal until you have all of your money out of the deal.

An example on the better option on your deal would be:

$420,000 - purchase price plus all closing cost etc...

$84,000 - 20% Down payment

$300 per Unit NET cash flow monthly (Not sure what you actually get but this gives you an idea if you drop in your number)

7.78 - years before you really cash flow and start to profit on this deal if each of the three tenants pay rent of $1,500 per month. Since this is before EBITDA the timeline does get reduced a little on the back-end after EBITDA. Rent increases and the future Coin Laundry facility can speed up this timeline as well.

Basically leaving the $420,000 all cash in a deal is a really bad idea especially since you can use the $336,000 cash-out on another deal.

I would sit the $336k in my Savings account at Goldman Sachs earning 2.25% until I need it, that way it's earning money instead of costing me money every month until I use it on a better earning option.

Totally makes sense Ray.

With your above example in mind, here are my numbers.

$2,000 Apt 1

$1,800 Apt 2
$1,800 Apt 3
=$5,600 Gross

P&I $1,600 ($420k with $105,000 down payment at 4.5%)
Taxes $16,500
Heating $2500
Water/Sewer $1500
Insurance $1700
=$3,450/month with mortgage and utilities

=($5,600-$3,450) $2,150 net each month

$105,000 down payment / (2,150*12 months=$25,800) = 4.1 years to recoup costs.

Then use $315,000 for another property.

Let me know your thoughts?

1 Vote

Originally posted by @Roxani Adam:

Omg, these properties are so expensive! Sorry if my comment is somehow irrelevant. With these money I buy 3-4 luxury properties in Europe :(

Find me a place in Europe and I'd be happy to invest! :)

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Investment Info:

Small multi-family (2-4 units) buy & hold investment in Union City.

Purchase price: $420,000
Cash invested: $420,000

Purchased my first multi-family investment property. Sold my investment condo a few months back and used the funds to purchase this new property all cash. I am debating whether to do delayed financing on this and pull the money out, or leave the money in the property?

What made you interested in investing in this type of deal?

Multi-family in the area has great rent, high occupancy, and future potential for great appreciation.

How did you find this deal and how did you negotiate it?

It was on the MLS and I came in all cash so I got it below list price.

How did you finance this deal?

All cash. I am debating whether to do delayed financing on this and pull the money out, or leave the money in the property?

How did you add value to the deal?

Kept 2 out of the 3 tenants and made minor improvements in the units. Replaced the toilet and shower heads with low flow to save and conserve water. I also plan to finish the basement and add coin-operated laundry in the basement for all 3 tenants to use. I also installed security cameras throughout the home.

What was the outcome?

2 out of the 3 tenants are very happy.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am a Realtor.

0 Votes

With the property in its current condition, the appraised value is probably around $500k.

I just did the home inspection and the property needs about $100k, which was what I expected.

This city is rent controlled. However, the benefit I have right now is the fact that the rents are not yet registered with the town.
So keeping the tenants as is with the low rents will set me up for low rent registration.

Instead, I would rather get them all out, do the necessary renovation, including separating the boilers, this way each tenant pays their own heat and hot water. Then I can list each unit for top dollar and register the new rents at top dollar.

So I have 2 options:
Delayed financing at $425k pulling 70% out (within 3 months of purchasing). $297,000. Then apply $100k back to renovation. Leaving me with $197,000 liquid to put back into my account for something else.
Or do the renovation putting $100k into it, all in of $525k after renovation, then cash out refi at the ARV (hopefully $650k). Thus getting $455,000 back liquid. Going this route would hit me with a higher interest rate though.

Thoughts?

Originally posted by @Brandon Sturgill:

@Steven Lewis No worries. The in-place rents for the cash outlay are pretty low, but that's all relative...the repairs seem excessive...assuming an ARV of $650k and cash out at 70% LTV lands all of your cash back in hand if you do not do the reno...use delayed financing.

$525k all in with ARV of $650k changes things quite a bit...you can't pull all your cash back out, but getting $350k back may work...

What is your possible appraised value as-is?

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@Brandon Sturgill Thanks for your reply. This is my first report and just paid to be a pro member, so I apologize if did the report incorrectly.

Purchase price $425,000 all cash.

I would keep the property as is with the 3 tenants in place, generating $3800 in gross rental income.

I didn't know what to put in the "Expense increase" and "Income Increase" and "Property Value Increase" so I just did small numbers. 3%, 1%, 1%

The property would need approx $100,000 in renovation, that I would not do yet.

I am selling properties similar to this around $650,000.0

I intend to just hold on to this property for the rental income.

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View report

*This link comes directly from our calculators, based on information input by the member who posted.

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Are you using an agent? Because the agent can help try to support those comps.

Which bank are you using? Are they local or a big bank? Local appraisers are much easier than if partnering with a big bank.

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I was blessed to have money gifted to me from my parents from their LOC (line of credit). The LOC comes with a monthly payment which I am looking to pay so I get that tax benefit. I'm looking for advice on the best way to show payment on this loan so I can deduct for taxes. I currently have an S corp and would like to pay that payment through the business. Would it be better to pay it back directly to my parents? Or to pay the lender directly?

0 Votes

All Forum Posts by: Steven Lewis

Steven Lewis has started 20 posts and replied 50 times.

Post: First multi-family purchase

Post: First multi-family purchase

Post: First multi-family purchase

Post: First multi-family purchase

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: [Calc Review] Help me analyze this deal

Post: Appraisals (Hudson County, NJ)

Post: How to properly pay back a LOC for correct write-off

Post: How to properly pay back a LOC for correct write-off