All Forum Posts by: Zachary Dosch

What a great topic - there for a while I thought it was just me that liked tinkering around with the different retirement avenues!

Tons of great info in this thread so how about a case study (me) to critique?

1. Contribute 6% to get the employer match of 3% for my Roth 401(k)
2. $5k (max) towards both mine and my fiance's Roth IRA (soon to be converted to a SD Roth IRA for Real Estate).
3. Whole life insurance policy - I was starting to become curious as to whether I should continue this or not - its a $500k policy and I have about 7 years (im 26) until the dividens completely cover the premiums. Shortly there after they really start to take off.
4. Investment RE account - used for the downpayments on the next property and emergency fund. This is also where the positive cash flow from the current property goes. (buy & hold philosophy)
5.) Seperate investment account with heavy dividend plays to create a snowball effect.

Thoughts, comments, concerns?

I don't mean to derail this great conversation because everybody does have very viable ideas, rather just how would you tweak this situation based on your experiences and expertise in a real life situation.

Also, the issue of overpaying when you own multiple propeties can be addressed when you work with a business banker that knows your entire situation and can take it all into account. Its much more subjective. When you work with a normal residential mortgage banker, they have much stricter lending guidelines they have to adhear to.

Its not about hiring trained people, its about the lending guidelines of the bank and the concentrations limits for the different asset classes that the bank currently has. The FDIC is on every bank to keep their concentrations down.

An example I can give is where Im from, there is a shortage of hotels but basically no bank can finance anymore because we have all hit our concentration limits so we can't do the deal despite the fact that they would be very profitable and there is a huge demand for them. Its out of the banks hands.

Often times, the banker will have to think outside of the box to get a loan done. You should develop a good relationship with a business banker so they know your situation and can be an advisor to you.

Unfortunately, banking is an industry where if you are wrong 5% of the time, you are out of business. Banks would much rather pass on 3 good loans rather than have 1 loan go bad. Its a product of the low interest enviornment which makes margins razor thin.

That insurance is a monthly figure - North Dakota is very low compared to most states.

There is seriously a negative vacancy rate in Mandan right now. Very bizzare but people are begging for a place to leave. I would have it all leased up well before the project would be done.

I did go a little low on the maintenance budget but I figured if everything is brand new and the construction company guaranting their work that I shouldn't have many expenses for a while.

Taxes will roughly be 900/mo after the 5 year tax free period ends.

I included the up keep with the property in the maintence budget. I would be the property manage at least to start. The property is literally like 2 blocks from where I work so at least it would be convenient.

I have an accountant and I would be able to use the lawyer we have a work being I would pay him out of my own pocket. I would keep the books - I should be good at that by now.

I didn't realize you actually grew up in Mandan. When did you move?

Mandan has changed quit a bit. There will be quite a few new businesses moving into the area, including a Wal-Mart super center. Believe me, the fact that this is in Mandan doesn't make me feel good but I think I could be getting in at a really good time. Another good aspect is this would be about a 2 minute drive from the interstate which is a big deal with so many people living in Bismarck/Mandan and commuting to the oil fields.

I realize this is going to be a tight deal because I am financing 100% of this but with all this said, do you think this is a fesable project? Its borderline but I really think that something can be done with this building.

I just wanted to resurect this thread becuase Im zeroing in on what this will actually cost me and what type of income it would generate.

Roughly it would generate $11,300/mo (4 3bed, 6 2bed, 6 1bed & Im operating on the conservative side for the rent amount).

Expenses would roughly be debt service of about $6,600, $900 for property insurance, Its exempt from property insurance for 5 years (renisance zone), $700 in maintenance, and I would do all the property management.

We are talking the place from the gutting phase all the way to turn key for a million bucks. Its not a great deal on the renovation being I would be using a general contractor, but for not putting any money down (because Im offering a lot worth 300k as collateral) Im thinking this could be a decent situation.

Initially I just wanted to do the bare minimum (about 600k) to get the building up and running but the more I think about it, the more gutting it make sense. Getting all the wiring and plumbing correct with out gutting the place would be next to impossible and this way I would be able to get in a couple more units.

How are you guys feeling about the deal now?

I have and I resurect the topic once they give me a solid estimate on the cost. Im just as leery as you about this but its such an amazing building as such an apazing price that I would feel terrible if I didn't find a way to capitalize on it is some way. Perhaps if I resurected the thread now it might be fun to bad some ideas around.

Right now we are looking at 1.3-1.5 million. The key to why this works is I can get the building and the land for like $50k. Seriously. The cashflow is a little tight but the upside is so high im having a hard time not moving forward with this.

I will give you guys an update once we formalize a plan. Right now we are trying to do all the due dilligence and planning with the contractor and city so once we put this into motion, there should be minimal set backs.

Turning a 15,000 sq ft. former public school administration building into an 18 unit apartment complex isn't the best way to get a start in rehabbing!

I guess Im a little confused as to why you would think that less competition (supply) would equal lower prices.

We could have a discussion about the Auto Workers Union vs. the managers of a bank and they costs they incur vs. what they generate but that might be another discussion for another day.

Generally speaking, the supply of banks is going to be directly related to how many people utilize their services. Somebody is going to meet the demand.

Its the same thing all the Occupy Wall Street people complain about but Ive always said if they don't like it, go home and pay off your CCs, auto loans, and mortgages as well and manage your own money from a tin can. If you can't, be greatful that somebody is willing to trust you with their money so you can have a house and a means of transportation. Its really that simple. If everybody did that, banks would be going out of business left and right.

Banks are cutting their costs. Its the only way they can survive in this low intrest environment. The fact that remains is that they provide a service that is in such demand that almost everybody person over 20 has to utilize their services in some way, shape, or form and we should all hope there is an abundance of suppy for those services or what would hold them back from increasing their margins and passing the costs onto us?

I paid roughly $150k for each and they generate about $1700/mo in rent with taxes being about $150/mo and insurance being about $70/mo which puts me at a positive cash flow of about $650/mo. Couple that with about $200/mo in principal reduction and it ends up being an ok investment of roughly 10k. There is zero vacancy which makes me think my rents are low. It never takes me more than a couple of hours to rent out a place.

Appreciation, which actually has been huge compared to the norm ($20k/property in the last year) has been a nice little cherry on top.

I haven't had to fix a thing at any of the properties yet. The reserves are building up for that. I also have one property on a 15 year loan which is what Im going to use for collateral for bigger, multifamily purchases in the future.

Its a nice, secure environment but I want some more action! I want a couple of rehabs or maybe a foreclosure of two. Alas, foreclosures go for market value but I am currently looking at rehabbing an old office building for apartments. That one is taking a good amount of vision and work, though.