All Forum Posts by: Van Doan

@Jefferey Mitchell Hey, welcome. Which REIA are you coming from?

A conversion MFH I was looking at went from a 4-plex needing electrical and deck work, to an illegal MFH that needed permits the seller would take care of, to a duplex as is (permits undetermined). Title insurance!

@Engelo Rumora ha, sounds like I should head out to Ohio. Washington state, especially around the sound, is a very different market. 

I plan on managing myself, but believe in having an attorney and CPA. I count a 10% PM because I will pay myself for my time and effort until such time as I decide to push it on to someone else and (this is key) still remain profitable. Rent is at market - I'd be more concerned about adding value to raise the quality of tenants. 

I don't doubt that I'll build up quite a reserve in the first year - but that's also budgeted to be spent. It's the year 2-6 and onward I'm worried about. Perhaps I can find a 5% down pre payed mortgage insurance that'll make the deal work. I agree, 15k makes it work.

@Grace Widdicombe that's an excellent realty check (pun). I got wrapped up inthe numbers and didn't do the common sense check. That being said, I like to factor in PM, to pay myself and to allow for future PM. The first year maint should be much cheaper, i agree on that point. Ive seen CAPEX argued as part of, or separate from maint. Finally, the repairs I'm just counting as part of the purchase price. I guess this is where the 50% rule can give a quick reality check and that ends up about $145 cash flow, but the low cost of entry gives it some credibility.

As it stands this looks to be a mediocre deal that needs massaging to make it a worthwhile deal. That  can be done by negotiating the price, and finding a good loan product, lowering expenses and adding value. I apologize for the typos; I'm on my phone. 

@Sam Albert 

Good idea, I'll have to make sure my contractors are tracking.

@Grace Widdicombe , thanks so much for your input! You're absolutely right, those calculations are worst cast scenario except for vacancy rate. It's a neighborhood growing out of it's rough history, so that's a factor. GMI=Gross Monthly Income. CAPEX = Capital Expenses. The roof has 10-15 years left, so I threw in a 10% monthly budget. The deal is pending inspections and contractor bids.

Thanks for the spreadsheet offer. I'm actually using this excellent one right now, but it's a bit difficult to check the math: http://www.biggerpockets.com/files/user/karkas/fil... It'd be good to check it off yours.

Finally, I guess I'm a bit nervous  because it doesn't follow the other "rules of thumb." A true purchase price of 170, and it's closer to 1% than 1.2%, which is good. It doesn't seem to cashflow $100 per door, which is bad, but no other places seem to. The cash on cash with worst case expenses starts to look like -13%! Terrible, and it doesn't turn around until year 10. I'm trying different financing to get rid of the mortgage insurance. In other words, not all the numbers work and that's scary.

I don't know if i'll be in town, but maybe we can get food and talk RE!

FHA 203k O/O in a C+ revitalizing neighborhood. C property. Comps are going for 200k or more.

Price: 150,000

Repairs: ~20,000 rolled into the loan

Down: 3.5% 6000

Premium: 795/mo

Insurance: 33/mo

PMI: 175/mo

100 years old

GMI: 1900

Annual Taxes: 2200

Maintenance: 10% 188/mo

PM: 10% 188/mo

CAPEX: 10% 188/mo

Legal/Accounting: $50/mo

Vacancy: 5% 95/mo

Gas/Water/Elec: To be submetered

Sewage/Trash: 50(?)/mo

Cap rate: 6%

Cash on Cash: ?

50% rule: 147/mo

Is the price in the area just too high or am I just overestimating expenses? I've been looking for 4 months and this is the only thing I've seen that's even remotely hitting the 1% rule. It seems like going with the stock market is the wiser choice here, but this property seems undervalued compared to comps.

@Erik Belgau I'll have to take you up on that. I'm more of a sport and trad guy than alpine, but I love learning new skills.

Thanks!

I'm looking for a owner occupied MFH in Stadium or Hilltop districts in Tacoma. Financing isn't a problem. PM if you're interested.