All Forum Posts by: Thomas Alexander

Thank you so much Bill. Can you elaborate on how that stabilized cap rate becomes 9% over ten years? How is that possible without numbers from the property?

I was hoping someone can help me with these terms, specifically the difference between in-place NOI and Stabilized NOI. Also I would like to know the difference between In-place cap rate and stabilized cap rate. I can't find them on google but i know these are common terms used in commercial. If someone could be so kind to explain what each are and the difference that would be a HUUUUUUGE help to me. I heard something about stabilized means an assumption with 90% occupancy or something?

A lot of times a 4 unit or less is a stepping stone to build up equity to get a commercial loan on a much larger property. In doing so, a seller of a multifamily will list their property at a Present Value price needed in order for them to have the capital to move up. So if they are 40k short from their goal, they will list the property 40k over market and cross their fingers. Otherwise they just wait until they have that 40k equity saved and just sell it at the market price at a later date. It just never hurts to leave your property on the market and amortize your way to your goal. Make sense?

I am curious about the 2% rule. I am seeing it used when people talk about a property under 80k or so which is not realistic in California. Also, If one were to purchase a 4 unit in California at about $400k (which is good), a 2% of $400k is unrealistic for a monthly rental income. Am i misunderstanding this concept or does my theory hold true in California?

Scott,
Those both sound like quite impressive cap rates for the LA area. When I find those cap rates it is generally in the area you described. Have you been through that USC area you are talking about? I have wondered about buying in those areas however it is a VERY sketchy part of Los Angeles which is the only thing that has stopped me from buying there. The tenants you may encounter there could be the biggest headache of your life. I know of someone who even had a death threat from a tenant in that area.

I am new as well but I can definitely say that even with my calculations, 850k is a STEAL in that area you are buying at. LA area has been talking a lot about it being in a bubble but I don't agree fully because people are not taking into consideration that this could all just be a strong bounce from the bottom, not much to really panic about that.

If you are looking to wholesale this deal, I think you will not have a problem turning around and selling it. Of course there is many more factors to consider but just based on paper this sounds good to me. West Hollywood area demands high rent. Based on your numbers I will also say in addition you have a lot of upward room to raise the rents too.

I am seeing that the good multi-familys in the area are closing after being on the market for 15 days. Some are on the market for over 100 days (probably something bad with them) and there really isnt anything in between. Like I said earlier about the bubble fears, LA is experiencing a significant bounce off the bottom so if you are looking to buy a hold in the short term, take note.

Don't forget to factor in the expense to remove vodka jello shots from the apartment walls.

I think you might have an easier time finding a partner if you decided to go down to a 4 unit that way it opens up the doors for your partners to get an FHA. There you will find a much bigger market.

Get a full survey. I mean a FULL survey of everything on that property. Don't go shopping for the lowest price either. This is not a property you want to fool around with for do the cheap route with. Other than that I am really curious to see what it looks like. Could be pretty cool if it checks out ok.

"Section 223(f) insures mortgage loans to facilitate the purchase or refinancing of existing multifamily rental housing." So first things first, this is not an FHA/HUD loan, because HUD does not lend money, FHA provides insurance on the loan allowing the lender to sell a security to fund the loan. So while FHA/HUD underwrites and approves the loan they do not fund it.

In addition, Seeing as you still need around 20% down, I don't see the real benefit of this route. I am curious also if you are required to live in one of the units like a traditional FHA for 4 or less units.