Hello BP Community,
I am a new investor. My wife and I have been waiting for a multi-family property that works for us, between 2-4 units, to come onto the market. In addition to being new investors, we’re moving to a new state, so I’m not familiar with insurance costs, utility costs, etc. in this market. This is making it difficult to estimate the actual expenses for the property, which in turn, makes it difficult to determine potential cash flow or lack of cash flow. Income statements from sellers have only listed the rental income, not expenses. My questions are:
- 1. How can I accurately determine the actual expenses for a property including garbage, electric, insurance, sewage, etc. (I’m already familiar with looking up the tax assessments)
- 2. Seeking any general advice on being a new investor
- 3. Any general advice on multi-family specifically (just watched the BP webinar on the subject)
- 4. Any general advice on the Louisville, KY market
welcome @Felix Sharpe
this is the best address going for investors
read,ask lots of questions,drive your farm area
You can ask for a seller's schedule E from their tax return, which should list ALL expenses associated with the property. No guarantee that people don't fudge the numbers, but since the expenses decrease their tax burden if they are getting creative they would be overstating expenses, not under. If they won't provide that you can ask for copies of recent utility bills. Also, insurers could generally give you a reasonable quote based on size, age, location of property. If a seller won't give you any actual tax info are alternate verification of expenses I would take it as a red flag.
For a new investor I would want to be very comfortable with knowing my units would be in demand. My first property was close to a new medical school in an area with a relative lack of housing, so I knew students would drive plenty of demand. If you are brand new to Louisville demand may be hard to gauge accurately. But, as a new transplant to the area you know what you are looking for as a prospective tenant or buyer. You could use how desirable you would find a unit as a benchmark for how tenants would view the property.
Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and rehabbers (cash buyers). Find them through Google and meetup.com
Two Great reads, I bought both J. Scott The Book on Flipping Houses, The Book on Estimating ReHab Costs http://www.biggerpockets.com/flippingbook
Consider checking out HUD homes for small multi's owner occupied gets first crack.
You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it.
To find out about an area and gather info go to IREM.org search for ARM certified property managers. Call 5 ask them what they see expenses running per category per unit. What do they see them selling for per unit, what is the market occupancy rate. What are the market rents? Ask them if they know anything coming up for sale. Great way to pick up some good info and possibly a deal.
You can also search NARPM.org for the RMP (Residential Management Professional) and MPM (Master Property Manager) certified.
Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over
@Felix Sharpe , welcome to BP and to Louisville!
First off, are you looking for a property to owner occupy or something to strictly purchase as an investment? If you plan to live in the building, knowing what part of town will fit your wants/needs will greatly narrow things down and allow you to focus on the right properties and choose one that works for you.
I've been investing in Louisville for several years now and would be happy to answer any specific area related questions you may have via PM.
Thanks everyone for the advice. I got to look at a property today that I believe has some potential - running the numbers through the BP calculator right now. @Michael Seeker We will be owner occupying for a year and we've been focusing on Old Louisville because I will be working downtown. Staying for the year per the FHA requirement.
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