All Forum Posts by: Dean Hulsing

I am interested in purchasing a MFR that has a substantial amount of personal property associated with it. I am in IL and the owner pays for the TAX at the time of closing and I feel that the Taxes are high in comparison to the amount that I am willing and they have accepted as a offer contingent on several other factors at this point. What I am asking on this forum is if there is anyone out there that would argue the property taxes for the seller prior to purchasing the property. The current Taxes are at 18032.17 based on an assessment of 509,148. we have agreed on a sales price of 455,000 and I believe that there is approximately 48,000 in personal property when all the stoves, dishwashers, refrigerators, air conditioners, lighting, carpeting is included. This would bring the value down to 407,000. The Taxes based on an assessment of 409k would be only 14,414. If a compliant to the Tax board was successful this would drop the taxes by 3617.72 per year. (or a little over 300 per month!) Two questions. 1. CAN I file a compliant the taxes prior to closing? 2. SHOULD I file a compliant prior to closing? Thanks for any input on this matter! I sincerely appreciate it!

I know how Multi-Families are valued by the bank,  based on the rental income but I wanted to add the part about how the area is not appreciating to demonstrate the need to NOT factor that in.    @Chris Soignier I sincerely appreciate the thought that you feel that I am not ready, that is exactly why I posted on here.  I was more interested in getting your opinion about the investment if I was to spend $50K in an effort to increase the rents.  On my original post I said that the area is not appreciating to get a better response from the numbers needing to be more favorable because of this. I get to see the rent roll tomorrow.  Is a market survey something that I can do just by asking the neighboring apartments or should I use rentometer or something like that.  I have two other single units and they are very high for the 4 bedrooms but they are "spot on" for the one and two bedrooms.  Again thank you for the input.  

thanks I will let you know I get to do a walk through tomorrow

@Joel Owens Thanks for the recommendations.  I have noticed the warnings about justifying the price based on the ability to raise the rent, possible appreciation, better management, etc.  I see the point in this as I have had the same problem with raising the rent on my own Tri-plex.  Thank you for putting it into the perspective that you have because I have not looked at it from the lost rent perspective.  I also appreciate the final paragraph about eliminating the assumptions A, B, C, and D.  I feel that I am optimistic but I need to look at all the numbers to make sure that they work. 

@Joe Fairless My Biz plan is buy and hold, renovating the apartments at turnover and slowly pay down the debt.I would like to hold for several years.   

I think that the improvements would bring the gross rent to over the 110000 at full occupancy and then this would fulfill the 2% rule. I used rentometer.com and stayed on the conservative side to establish a reasonable rent for the property. I will see the HARD numbers on Wednesday when we do the walk-through inspection.

Originally posted by @Vincent Crane:

You'll want to get opinions on repairs from a contractor, and on the management expenses from an actual property manager to get their thoughts as well. The taxes seem very high, but other than that the numbers do look pretty good.

Thank you for the reply.  I am in the process of getting HARD numbers from the Sellers and exploring the amount of work (from contractors) needed to get this up to where it needs to be.  I think that the property taxes ARE high.   If I can successfully file a compliant to the property Taxes and separate out the Stoves, Refrigerators, Dish Washers,  Air conditioning units.  I estimate that I can get this lowered to show the actual price of the building and not the price including the personal property.  I estimate that I can get the real estate agent to write up the final contract to a 407,000 for the building and 48,000 for the personal property included with the purchase.  Is $3000 per unit enough (or too much?) to justify the all the personal property?  If my Real estate taxes compliant is successful then my taxes would go down to 14414.44 per year!This would greatly improve my cash flow for this property.

I am interested and I have signed the initial paperwork for my first (relatively) Large Multi-family. I own 4 homes outright and I have bought them on as renovations that have required several hours of my time and effort and capital to rehab.  I also have one Three Plex.  Kind of a Waldo!  I truly enjoy rehabbing but I am getting to the point that I have very little time to dedicate to a new endeavor. I want to run through the numbers and please let me know your input on this as a viable investment. Thank you so very much. Here they are!

16 Unit Apartment Complex

Price: 455,000

Average Income (last four years): 88,400 ( I hope that I can get this up to 100,000 by managing better!)

Vacancy: 12.5% 14/16

RE Property Taxes: 17395

Property Insurance: 3500

General Maintenance: 1800

Repairs (average past 4 years): 2700

Management: 9100. (I think I could get this down to $4550)

Advertising: 250

Appliances: 1000

Lawn and Grounds: 1800

Miscellaneous: 500

The other questions about this property that I have concerns about are that there are repairs that need to be done and I estimate the repairs to be in the range of $50000. I do not think that this area is an area that will appreciate as the area has not seen an increase in population in the past 10 years. It has not declined but appreciation is something that I can not factor into the equation. Thanks for any input and any further suggestions in this matter.  

Originally posted by @Patrick Noel:

Hey Dean, Congrats on getting starting in Multi-Family. My first concern concern is only $2,700 has been allocated to repairs, yet the building needs $50,000 worth or repairs? This seems a bit odd. If that is the case, I am assuming the building is relatively old. Do the tenants pay utilities? What is the CAP in the area? What value have you given the property? Are the rents below market such that you would be able to get it up to market at $100k?

 The numbers from the real estate agent have the listed repairs averaging $2700 in repairs. I feel that if we spent some capital (about $50000) improving the property the return on this would be three- fold. I would not only get better tenants but I would also show that the property is being managed in a more professional way. The third benefit that I would be able to see is that we could increase the rent to gross 100K. The current rent is low. I think that conservatively the area supports $550 (*8) for a one bedroom and $600 (*8) for a two bedroom. The amount that this would bring in would be $110,400 (@100% occupancy) At 87.5% Occupancy or a Vacancy of 12.5% it would be $96,600. The cap rate in the area is 10.

@Patrick Noel

The numbers from the real estate agent have the listed repairs averaging $2700 in repairs.  I feel that if we spent some capital (about $50000) improving the property the return on this would be three- fold.  I would not only get better tenants but I would also show that the property is being managed in a more professional way.  The third benefit that I would be able to see is that we could increase the rent to gross 100K.  The current rent is low.  I think that conservatively the area supports $550 (*8) for a one bedroom and $600 (*8) for a two bedroom.  The amount that this would bring in would be $110,400 (@100% occupancy) At 87.5% Occupancy or a Vacancy of 12.5% it would be $96,600.  The cap rate in the area is 10.

I am interested and I have signed the initial paperwork for my first (relatively) Large Multi-family.  I own 4 homes outright and I have bought them on as renovations that have required several hours of my time and effort and capital to rehab.  I truly enjoy rehabbing but I am getting to the point that I have very little time.  I want to run through the numbers and please let me know your input on the investment.  Thank you so very much. Here they are!

16 Unit Apartment Complex

Price:  455,000

Average Income (last four years):  88,400  ( I hope that I can get this up to 100,000 by managing better!)

Vacancy: 12.5%  14/16

RE Property Taxes:  17395

Property  Insurance:  3500

General Maintenance:  1800

Repairs (average past 4 years):  2700

Management:  9100.  (I think I could get this down to $4550)

Advertising: 250

Appliances:  1000

Lawn and Grounds:  1800

Miscellaneous: 500

The other questions about this property that I have concerns about are that there are repairs that need to be done and I estimate the repairs to be in the range of $50000.  I do not think that this area is an area that will appreciate as the area has not seen an increase in population in the past 10 years.  It has not declined but appreciation is something that I can not factor into the equation.  Thanks for any input and any further suggestions in this matter.