 Advice on multi unit (by John2 [MI]) Nov 19, 2018 5:17 PM
 Advice on multi unit (by GKARL [PA]) Nov 19, 2018 5:52 PM
Advice on multi unit (by John2 [MI]) Nov 19, 2018 5:58 PM
Advice on multi unit (by Ken [NY]) Nov 19, 2018 6:01 PM
Advice on multi unit (by David [NC]) Nov 19, 2018 6:16 PM
Advice on multi unit (by David [NC]) Nov 19, 2018 6:23 PM
Advice on multi unit (by GKARL [PA]) Nov 19, 2018 6:32 PM
Advice on multi unit (by Steve [MA]) Nov 20, 2018 3:20 AM
Advice on multi unit (by Tim [IN]) Nov 20, 2018 4:23 AM
Advice on multi unit (by S i d [MO]) Nov 20, 2018 6:19 AM
Advice on multi unit (by S i d [MO]) Nov 20, 2018 6:24 AM
Advice on multi unit (by Richard [MI]) Nov 20, 2018 7:54 AM
Advice on multi unit (by RathdrumGal [ID]) Nov 20, 2018 8:04 AM
Advice on multi unit (by GKARL [PA]) Nov 20, 2018 8:32 AM
Advice on multi unit (by Robert,OntarioCanada [ON]) Nov 20, 2018 9:54 AM
Advice on multi unit (by Robert J [CA]) Nov 20, 2018 1:23 PM
Advice on multi unit (by John2 [MI]) Nov 21, 2018 11:23 AM
Advice on multi unit (by John2 [MI]) Posted on: Nov 19, 2018 5:17 PM
Message:
Hi everyone,
We are attempting to add multi units to our portfolio. Tomorrow, I’m going to look at a property that has 5 locations. Each location has 2 units and each unit has 2bd 1ba. The duplex’s are all next to each other and take up nearly a whole city block. From the outside they all seem very well kept and updated. Have any of you ever done a land contract like described below? Any advice would be greatly appreciated and thank you in advance!
Here is the fact sheet:
Owner will finance on a land contract amortized over 20 years with a $100,000 down payment. No banks or realtors involved! Please Realtors do not call!
All units are leased and should show a positive cash flow from day one (Plus a $16,058 mortgage pay down for the 1st year growing each year thereafter) - estimated financials show:
Current Annual Rent $95,940
Interest Year 1 ($46,741). Property Taxes ($10,078, Insurance ($3,488)
= Gross Profit $35,093
Maintenance expense TBD depending on owner participation
Note - Mortgage Reduction 1st Year $16,057
--24.247.xxx.xxx |
Advice on multi unit (by GKARL [PA]) Posted on: Nov 19, 2018 5:52 PM
Message:
I think some numbers are missing. What about insurance, maintenance, utilities, capex and etc. What is the purchase price? The first thing that should be done is calculate the cap rate and compare with the market cap for the area. It's hard to evaluate whether or not you have a good deal unless you do that. What does it mean when you say maintenance is determined by owner participation? --209.122.xx.xxx |
Advice on multi unit (by John2 [MI]) Posted on: Nov 19, 2018 5:58 PM
Message:
Asking price is $775,000 and cap rate is 4.53%
Im guessing they mean maintenance cost would be less if owner does their own maintenance.... --24.247.xxx.xxx |
Advice on multi unit (by Ken [NY]) Posted on: Nov 19, 2018 6:01 PM
Message:
Unless you get the deed in your name do not do it,a land contract is bad deal for a buyer.If the seller gets a judgment against him it is attached to your house.If you can put down $100000 you should get a deed in your name and give the seller a mortgage.Chances are if he is offering a land contract he is very knowledgable and you probably wont stand a chance negotiating with him,he is not as motivated as he wants you to think he is --72.231.xxx.xxx |
Advice on multi unit (by David [NC]) Posted on: Nov 19, 2018 6:16 PM
Message:
I don't think I would buy duplexes unless I got a good deal. With a good deal being a 10% cap rate in my mind. But everyone is different with different criteria. --65.188.xxx.xxx |
Advice on multi unit (by David [NC]) Posted on: Nov 19, 2018 6:23 PM
Message:
I don't have as much experience as some of the others here but with duplexes you are going to have to do lawn care and I would figure it in as an expense even if you decide to do it your self. If you are getting $800 a unit / month (which would be great here - same place here gets $575 or $600) you got to figure at lease $100 a month per unit for lawn care. You got to figure these units are going to be needing roofs and HVAC etc. I'd expect your net would be half of your gross. So if you are getting 50K net; I'd only be willing to pay 500K for the units. Now maybe that doesn't fly in your market. Maybe 600K would fly but 775K seems high to me. --65.188.xxx.xxx |
Advice on multi unit (by GKARL [PA]) Posted on: Nov 19, 2018 6:32 PM
Message:
This is not a good deal. That cap rate is less than 4.53 because you're missing major expenses. I'd figure maintenance in around 10% of rents. Your cap rate fully loaded is probably around 3% and it won't cash flow. I'd walk away. --209.122.xx.xxx |
Advice on multi unit (by Steve [MA]) Posted on: Nov 20, 2018 3:20 AM
Message:
It doesn't hurt to take a look inside to see the condition of the units & the tenants for yourself. Once you've seen the inside then you can decide if it's worth investing anymore of your time chasing this deal. IMO someone is going to make money with these units. However at that price & with a land contract not a straight purchase, it's not going to be the buyer. --96.237.xx.xx |
Advice on multi unit (by Tim [IN]) Posted on: Nov 20, 2018 4:23 AM
Message:
Walk away. Don't bother looking unless you see 8% or higher. If you want 5% return, buy a dollar general store with a NNN lease. No repairs for you. Easier life. --166.137.xx.xx |
Advice on multi unit (by S i d [MO]) Posted on: Nov 20, 2018 6:19 AM
Message:
Several issues with this deal, some of which have been answered, so I'm reiterating for clarity and support:
1) Cap rate under 5 is terrible, even in today's tight market. Minimum of 9 to do the deal. Prefer 12. You'll make 8 on your money in a boring S&P 500 mutual fund. Why would you even consider the hassle of multi-fam for anything less?
2) Title. You NEED title to the property. Land Contract means the seller still has the title. If he screws up and gets a judgment against him, or a tax lien, or dies and has 12 squabbling heirs get involved, or any number of other stupid things, you can easily lose you entire investment. Land contracts are very high-risk for the Buyer unless they are short-term and very cheap. If the Seller wants security, sign a Deed in Lieu of Foreclosure or a Quit Claim to be filed if your payments go more than 60 days delinquent. Spell out the conditions in the Promissory Note so he feels warm and fuzzy about it.
3) "Should cash flow immediately". Let's see a Schedule E on that. Trust, but verify.
As for me, the return is too low. Tying up $100,000 in capital on a sub-par deal doesn't excite me. The Land Contract on a deal this expensive is a no-go, even on a good deal. --173.20.xxx.xxx |
Advice on multi unit (by S i d [MO]) Posted on: Nov 20, 2018 6:24 AM
Message:
Btw, you do realize that "if the owner does his own maintenance" means you are buying yourself a job, right? Investors who fix toilets are glorified handymen. No offense to those who do this: I used to do that too! It's not a bad way to start when you're new to the game and need to build up some sweat equity. But doing your own maintenance for free is NOT investing: period.
If you want to be a handyman today, I suggest buy yourself a truck and overalls and charge someone else $40/hour plus a $50 service call. There will be no shortage of demand for your services in today's tight labor market. --173.20.xxx.xxx |
Advice on multi unit (by Richard [MI]) Posted on: Nov 20, 2018 7:54 AM
Message:
Any cap rate below 10 is for big time investors who use other people's money. I want 12-16 or in not interested in even looking. Would only consider 10-12 rate in a really good area with strong appreciation. --23.121.xx.xxx |
Advice on multi unit (by RathdrumGal [ID]) Posted on: Nov 20, 2018 8:04 AM
Message:
There is a development like that in my area. It is a development of townhouse style duplexes set in a cul-de-sac with a playground/park in the center. The development is very attractive, uniformly painted, and well maintained from the outside. I have never been inside the buildings.
The realtor who told us about these said that, although the townhouses appear to be all owned by the same company, they are actually individually owned by investors and managed by a realtor who also owns several units. The realtor who showed us this development said most of the investor were high income professionals who want turn key properties where all they do is cash checks. The realtor himself has a sweet deal -- he gets the sales commissions when the units turn over, he gets 10% of the rents as a PM, he can steer the best qualified tenants to his units, owners are required to use his contractors for repairs.
Good deal for the realtor/PM; bad deal for the investors. Look carefully at any management contract the seller may want you to sign. --98.146.xxx.xxx |
Advice on multi unit (by GKARL [PA]) Posted on: Nov 20, 2018 8:32 AM
Message:
A 10% Cap is my minimum to do the deal. That's almost impossible to find in my area now. --209.122.xx.xxx |
Advice on multi unit (by Robert,OntarioCanada [ON]) Posted on: Nov 20, 2018 9:54 AM
Message:
Any building everything has life expectancy where get the age of the roofs, windows and HVAC systems. So can make a decision if worth while. See actual copies of all the utility bills, taxes along with other expenses. Do not just take what is on a spread sheet to be accurate. Seen a spread sheets where the actual operating are considerable higher then on the spread sheets. Is there a dumpster on the complex where that is not listed. Look at everything very carefully. --104.129.xxx.xx |
Advice on multi unit (by Robert J [CA]) Posted on: Nov 20, 2018 1:23 PM
Message:
For a beginner, you never want to own properties near to once another. One bad tenant, then everyone wants to move. Start small. One building at a time. The more units you can buy at once the cheaper it is per unit.
For example a house may be $250,000. A duplex may be $300,000. A Triplex may be $325,000. A four unit may be $400,000. A five unit may be $450,000. You see the more unit the cheaper the price per unit while the rents stay the same no matter how many units, it's the square feet and bedrooms per unit.... Just one tip. --47.156.xx.xx |
Advice on multi unit (by John2 [MI]) Posted on: Nov 21, 2018 11:23 AM
Message:
Thanks everyone for your advice! I went to look at the multi with all of your advice in mind and some written down to ask questions... long story short I will be passing on this ... I spent some time discussing what we had to have to move forward so I left the ball in the sellers court to contact me with a better offer.
Again I really appreciate all your comments and advice! --174.230.xx.xx |
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