All Forum Posts by: Johnny P.

try to verify the income by asking for a current rent roll & P&L. Schedule E helps of course.

Verify the gross income

calculate the property taxes that you will pay when the property is re-assessed after the sale

Get a few new insurance quotes because it normally increases for new owners if your lender requires windstorm coverage

Add a management fee

use the 50% rule to quickly look at deals to estimate a cap quickly

I'm working on a deal right now with that sort of structure. The buyer is looking to put the property in contract with a 90 day "test drive" / inspection period. During which time he will be managing the property to improve occupancy.

The important thing for you is to put it in contract at an agreed to price before starting the management. This type of structure is rare but it seems like you have the opportunity to make it happen.

If you don't have it in contract and increase the occupancy, it will be worth more and the seller will want a higher price if and when you are ready to buy

It can drop on buildings in the range of 100+ but then you are looking at hiring leasing agents and onsite maintenance help.

Hey Tyson,

I work with a buyer (syndicator) now that is very successful at the same strategy you're proposing. Have you had any success raising money from other investors in the past?

My advice would be to have the money raised before finding the deal. You want to be able to act fast if a deal hits your desk. Putting a deal in contract and they trying to syndicate the money is a tough road.

EVERYONE out there wants value add deals, if you can't bring a cash offer quickly, you will be beaten on all of the good deals... or won't even see them.

8-10% management fee is pretty standard in my area.

Hey Peter,

Hire a professional property inspector. It should cost 3k or less on something this size. They will inspect each unit and the roof & structure.

I don't see very many environmental inspections on apt buildings.

Pay for a full inspection, its worth the money!

No it doesn't make sense! Too much risk. There are deals selling in Cali for 5 & 6 caps... why buy something with no return?

Keep underwriting deals with YOUR expenses. Keep making offers and you will find one that works. There is no easy way to convince a seller to lower the price because you will have higher taxes, repair costs, lawncare costs, insurance costs, and management costs. Find the number that makes sense for you, if the owner doesn't accept then all you can do is look for more deals or wait for them to meet the market.

The broker should NOT be telling you that the seller will not take offers based on your underwriting... its different for everyone and that's an insane statement! Every buyer I've ever worked with tells me how and why they are offering a certain price. I would tell them to pound sand!

Hey Eric,

This is an easy question! You need to meet all of the multifamily agents in your area. Almost all of the buyers & owners I work with ask me for management companies that I would recommend. Let me tell you who I send them -

I send them the agents who will tell my buyers that they can keep the buildings full, confidence goes a long way!

I once referred a potential buyer to a local property manager who told them "I wont even work in this area, its too hard to keep the units full and collect rents". Guess who never got another referral from us!!! They obviously weren't hungry enough to get out there and work.

Make friends with the agents and you should get plenty of referral business. With your experience it seems like you will run the properties well and agents would love to refer you!

How long has the commerical laundry been there, and how much time is left on their lease? Any chance of them moving soon?