All Forum Posts by: David Wolf

The stain on the back is cooking grease. It appears that a previous tenant decided to dump it out the window. I would expect it to come off fairly easy with a pressure wash bath and some soap.

Currently the house is completely empty but was rented as of a few months ago according to the neighbors. Apparently the tenants did not want to leave. Your right about the school year already started. However, I think this would also appeal to the young single professional crowd in the area.

I have purchased a few REO's in the area and on each I offered less than 75% of asking. This specific property has only been on the market for a week and I really dont expect it to last long. While I was viewing the property another investor was also looking at it. Unfortunately if purchased at the asking price it does not leave that much room for repairs and still be able to cashflow.

Taxes: The millage rate was 39.9980 last year after sales tax deductions. Expect the taxes to be about $1500 after the property value adjustment.

Btw, good detective work!

Everyone,

Thank you for the replies. Yes, those are the pictures but sometimes pictures can make something look better than reality. Specifically the rent would be $500-$600 per apartment or approximately $2000 total. Overall I estimate each apartment to be about 900 sq ft. The big question is attempting to estimate how much this would cost to repair and then the untold number of hidden problems in a house this age.

The roof looks to be new but I found signs of water. Who knows how long ago.

Windows cant be opened. Really should be replaced but at 36 windows...

The slanted floor in one of the rooms. It looks like the foundation was fixed but it will need to be inspected by a qualified engineer.

The old hardwood floor looks nice in pictures but really is well old..

Anyway, so many really unknowns make me nervous about this deal.

The view is off the top balcony and shows the Law School across the street.

Hello Everyone,

I am contemplating putting in an offer for a 170 year old home which has been split into 4 apartments. The main benefit of this house is its location: 1 minute walk to the areas prominent university. In addition it is in the historic district of the town and overall a very nice area. Obviously the main tenant base of this property would be the law students that attend the university.

The main drawback is the properties age. With a property this old it is really difficult to attempt and estimate the number of repairs. While my wife and the Realtor seem to think it would rent as is, I cant help but think it needs updates.

1. 100% hard wood but really needs to be sanded and refinished.

2. OLD Windows. None of them open. I counted 36 windows.

3. Paint over paint over paint add 100.

4. Bathtubs should be torn out and replaced. While they function I am not certain they could be cleaned to my standards.

5. Worst part: The floor in one of the units has a pretty good tilt in one room. The foundation has been renovated in the past but who knows how current the tilt is. Obviously would get a structural eng to take a look during inspection period.

6. The roof looks fairly new but I saw signs of leaks.

Some numbers:

Asking: 95,000 (forclosure, last person paid 250k in 2006)

Rent: $500 - $600 Depending on how nice we make the units we could probably charge more due to the location.

Utilities: Separate except for water.

Estimated Repair: Personally I think it would cost approximately 25K to completely fix the property. Windows would be a huge part of that..

@Joel Ownes @Ned Carey

Thank you both for the very informative replies. I really appreciate it.

This complex is the entire development. It is essentially a road which leads off a high volume road completely surrounded by a forest for a few acres on all sides. Hence why I think a security gate/fence at the front could completely isolate this property.

Currently the property is owned by a husband and wife team according to the tax records. They have it in their own name and not an LLC. It would be nice if it was a foreclosure and you could deal with the bank directly. Unfortunately it seems that this type of deal would require hard money which would be crazy considering you would need to rehab, lease up, and seasoning time before you could refinance. This is they reason I was curious about a commercial construction loan. It seems to me that a project such as this is less risky than brand new construction.

I actually believe the $550 is low for the unit size in the area. There is two direct completion properties in the area which have much smaller units and rent for more. Of course it would require much more due diligence to verify. In addition I have a 1400 SF SFH about 5 minutes away which rents for $775. Regardless, it would make since to rent low to fill the property and slowly increase rents.

The property was originally built in 1978. I did a little research on the led paint issue and apparently this was the year the law changed. I do not know if the property is sub-metered or not but would be easy enough to find out.

Oh, by condo style units I just mean it has 6 units per building. Each unit has the bedroom/kitchen downstairs with two bedroom upstairs.

Overall, this is more of a thought exercise/day dream but I did send an email to the selling broker. I would like to get permission to hire a general contractor to give me an estimate on repair costs and inspect the units. Even if it costs some money I think it is an excellent learning experience.

Assuming I desired to go through with this project would you contact banks/HML's before placing an offer or after? Also, how long would you allow for an inspection contingency? Obviously it would be logical to get many bids.

- David

Hi All,

I don't think I have really ever posted on this board but have read it for years. This forum has given me great advice which has allowed me to purchase a few SFR's in the middle Georgia area at great prices. Now I am researching the feasibility of apartment buildings but have a few questions.

Quick Bio: I am 31 years old and have served 11 years in the military stationed at Robins AFB, GA. Currently I have about 250K liquid which I would like to put to use other than the stock market.

Anyway, I was looking at at an apartment renovation project which I found on Loopnet. This property consists of 42 condo style 2br/1.5 bath units(1300 sq/ft). Currently 5 of the units are rented at $550 and 36 of them are completely trashed. I drove by the property and I mean they are trashed. They would require HVAC, wiring/plumbing, carpet, kitchen etc.. Essentially a complete rehab.

The positive points are that this apartment was at least semi rented not that long ago. I have gone back in satellite historical imagery and just took a look at the car count. In additional 5 of the 7 buildings had new roofs installed within the last 5 years. Overall this complex just looks like it has completely suffered from owner neglect. The owner also has a few other properties in the city(thanks tax records) which are in similar disrepair.

The owner is asking about $300,000 which is probably too much for the state the property is in. While I have not had a general contractor walk the property I am estimating that each unit will require approximately $15,000 in repair. In addition the property would require a security gate/fence, parking lot resurfacing, and lots of landscaping.

Financial Data – I have created more detailed spreadsheets to model this out but here is a quick overview.

Price: $150,000 (thats what I would probably offer the owner)
Renovation: $525,000 (units) + $75,000 (miscellaneous items)
Total Cost: $750,000
Pro Forma Rent: $277,200
Expenses: $138,600 (estimating 50%)
Net: $138,600
Cap: 18.48%

Obviously the above numbers would be excellent. However, this does not take into account holding costs while the property is renovated and stabilized. In addition the expenses are a complete guess as it is hard to estimate with a near empty complex.

Enough with the background and on to my probably simplistic questions:

Financing Questions
Obviously a bank would not give a standard commercial loan on this project as it is not stabilized.
Financing possibility
a. Commercial Construction Loan - What do you think the chances are of obtaining a construction loan to rehabilitate and stabilize the property. After it is stabilized refinance.
b. Hard Money – Huge risks with this. What happens if you only have 50% rented out after a year? Would it be possible to get a typical commercial loan on the amount owed to the hard money lender? The property would have no problems paying the loan at this occupancy rate and still have 50% for expenses.
c. Any other financing options?

I could go one but I think this is enough for one post.

Thank You,

David

I am curious about peoples opinions on purchasing rental property in a county that just lost its school accreditation.

http://www.wsbtv.com/news/17323636/detail.html

Some great deals to be had in Clayton county. Problem is if you where renting would you rent in a county where its schools are some of the absolute worst?

Some interesting listings:

http://www.georgiamls.com/search/propDetail.cfm?LN=2621248
http://www.georgiamls.com/agentsite/search/propertyDetail.cfm?SiteID=HUBERTDIANA&LN=2739796

I was considering a multi unit but in the Atlanta area the deals really seem to be in SFR. Plus I thought it might be easier to find PM for a SFR than a multi.

I am not certain what you mean by using the downpayment also. The 50% seems to be completely based upon how much property will rent out for, your expenses, and your mortgage. Anything left seems to be actual profit on your out of pocket expenses. If you put spent 20k downpayment/fixing/renting a property and after the numbers play out, make $100 a month you really are only making a little over 5% on your money. :cry:

I have yet to call property managers and attempt to find vacancy rates. What I have done is look at available rentals from various sources and take a look at what some of the demographics sites say. This specific area apparently has a 5.5% vacancy rate according to bestplaces. Its a good idea to call them and get an idea of vacancy rates and time to lease.

Well, the original idea was to partner up with him and purchase a few properties. We have discussed it some but I really seem more interested than he actually does. When someone does not respond to emails for a few days because they are 'chasing girls around' it is a bad sign. I'm not certain what he could bring to the table aside from living in the local area. If something does go drastically wrong I do have friends in the are that would help out.

So yea, I am probably just going to go on my own. :roll:

EDIT: Aluminum Construction? Anyone know much about it?

Hello All,

This is my first post on this site. Found it about a week ago and have been reading it non stop. Its full of good contributions, thanks! For the founder I bet you love the adsense income. Now thats a nice passive investment!

Anyway, a little bit about me before I ask a few questions. I am 28 years old and currently live in Germany. I just moved here from Georgia about a year ago as I am military. Currently I have a house in Georgia that I tried to sell but ended up renting out before I moved. It completely does not meet MikeOh 50% rule :)

A few weeks ago a friend called and he passively said he was looking to buy some rentals in Georgia and wanted a partner. I had not looked at the mls listings since I originally bought my house in 2003. All I can say is, wow. These things are really on sale. I've been constantly looking at various listings and see lots of deals that would appear to meet the rules touted on this board.

One I was considering:

Listed: 52k
Year: 2002
Estimated Rent: 850 - I found only one rental listed in this smaller town and it was actually the same exact design.
Construction: Aluminum/Vinyl

I just got off the phone with the agent and she says the owner is an older individual whom has had the property on the market for 6 months. Supposedly it is in perfect shape. From the conversation I believe he originally bought the property to flip it but has had issues. Now just waiting on her to send me many photographs as I cant easily look. If I like what I see have a friend check it out.

The numbers to me seem to work. I have been pre-qualified from USAA for a 5.3% investment loan. If I picked up the property for 45k + 3k closing and had a 38k loan the mortgage should be about 211.02. Other numbers I estimated:

Maint: 15% - 127.50
Mang: 9% - 76.50 (thats what the local PM seem to charge)
Vacancy: 15% - $127.50
Tax: 10.59% - 90.00 (Guessed...)
Insurance: 4.71 - 40 (Guessed Again!!!)

That comes up to about $461.50 a month in expenses or about 54.29% of the rent.
$850 (rent) - $461.50 (OE) - $211.02 (DS) = 177.48 Cash Flow

What do you guys think about a deal like this? Also, what do you think about the aluminum construction. I have never heard of that before. From the pictures I would think the house is completely normal. At least it does not look like a trailer lol

Thank You