All Forum Posts by: Christian Brodin

Steve,

Since you have already made an offer it seems that you are intent on getting the property, regardless. If you come back with contingencies after making the bid, and having the seller counter you, you might weaken your hand, i.e. seller will think that you are not serious.

That said I think the best thing you can do is to get the deal under contract (with inspection contingency) and then review all the lease documents for the residents. I would also make sure you get an independent inspector to inspect the property (so that they dont work for seller) Make sure that you understand what the current agreement is, and what you can and cannot do. Do you have knowledge of MI landlord tenant laws? If not I would go to your local landlord association and get some advice on what you can do.

I typically inspect units and anyone who doesn't follow their lease in terms of cleanliness and habitability gets a 3 day notice to cure. If they dont follow the rules they are evicted. YOU HAVE TO MAKE SURE YOU UNDERSTAND YOUR RIGHTS AS LANDLORD AND TENANT RIGHTS BEFORE YOU DO THIS. if you dont it can come back to bite you. I believe some states/cities have protection for hoarders so you want to know about this too.

If you do get the property make sure you screen any new residents, and that you have a clear policy on your rental qualifications. This can help you mitigate problems down the road.

Please let me know if this answered your question. 

Christian

Craig,

Based on what you have provided of information it does look good. But like one person before me said, where is your CAPEX (roof, plumbing, electrical, structural, AC etc), and vacancy/turn costs, admin costs ?

Also, is property tax based on new price or old valuation?

Sounds like rents are very low, something that would have me ask if your renters are low income residents. There is nothing wrong with low income residents, just that it tends to come with different payment habits. I.e. paying rent late in the month, no rent payment, suddenly move out etc. This is something that I would factor in. So bad debt, high turn over, cost of turning the unit due to substantial wear and tear, 

Just something additional to think about. 

Also, even if you self manage there is time cost, and opportunity cost. If you are really in this for a profit you need to include your cost of management!

Good luck.

Christian

Michael 

What are utility costs per month? or does tenant cover all utility costs?

Is this a SFH? or do you have more than 1 tenants?

Are RE taxes based on current valuation or new valuation when you buy the property?

How about landscaping? Will you do this in-house, or hire someone?

Also, for repairs when was the roof installed, is the plumbing copper?, is the electrical copper? 

As a rule of thumb banks (at least that ones that I work with) will use 41% expense ratio, which can he high, but definitely not uncommon. It will of course depend on the age of the property.

Christian

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Nancy,

A couple of things before I start analyzing your numbers. 

Before you even start looking at the asset itself I would want to know what you know about the market, and how you found the deal. Also, If you are an out of town investor how much confidence do you have the management company that will manage the deal? Do you have a long term relationship with them, with actual results?

Depending on what you answer, the actual deal numbers will vary greatly, especially your expense ratio, funds needed to do upgrades (quality of upgrades), and ability to raise rents.

Do you have a solid market analysis of the rents that the comps and reach-to comps are getting (if not you can do this easily using craigslist)? Or are you trusting the management company's information on what they can achieve in terms of raising rents.

After owning and managing over 2,500 apartments the last 10 years it has been very difficult for us to make money on c class deals in c class markets because unit turns, vacancy, concessions and bad debt tend to eat up profits. That is unless you have a management company that eats, sleeps and breaths property management and lives on site. or the property is in a transitioning area that is moving from c to b, or b to a and better paying residents are moving in. 

Im more than willing to help you analyze the deal, but need to know where you are coming from and how realistic it is that your return goals will be met.

Best,

Christian