Longview, TX · Member since 2015 · 21 posts · 8 votes
I have a 4 unit deal that I am currently analyzing. From what the seller has told me and provided me with, it seems to be a good deal. I've used the BP calculator but it doesn't pencil out all of the units the way I want it to. If anyone is willing to take a look at the info I have, please contact me! Thanks in advance!
Hey Blake, not sure how many deals you've done so far, but to me it sounds like you are depending wayyyy too much on the seller providing you info. Yes, seller needs to provide info, but you have to run your own #s and verify what they're telling you (i.e. get copies of checks deposited and not just take their word for it). Sellers will always try to show more income than they're actually collecting, by talking about "potential" or pro forma, etc., and always downplay the expenses. After you've analyzed about 100+ deals you'll start to get a feel for what income & expenses should be; this coupled with walking through dozens and dozens of properties (if you've done some renovations, that will also help with what needs to be fixed, which will add to your cost).
El Cerrito, CA · Member since 2016 · 54 posts · 8 votes
10y
@Blake Boyles BP calculator is part of helper in analyzing deal. If you can send out the link here others member will look at it and advising you according to their experience.
Longview, TX · Member since 2015 · 21 posts · 8 votes
10y
@Brent Coombs Sorry, I guess it would have made sense to post the numbers with the post lol!
Asking price: $273,000
4 units, all 2 bed 1 1/2 bath - rent for $750/month according to seller
Expenses: $6,000/yr
I have recently asked if there are any repairs needed, have not heard back from her yet. From the pictures I've seen, it doesn't look like it needs any repairs. I will post the link to the property listing on LoopNet.
I would put it at a B+/A- neighborhood (not sure how to calculate that, but there are really nice houses at $1M+ within 2 miles).
Also currently awaiting the comps from the seller.
She is selling due to a divorce, so she may be motivated. She says there are 14 total units on the property and she wants to keep all but 4 to avoid capital gains tax.
Does this mean you'd be buying 4/14ths of the whole property, or is there clear title for that 4?
I've recently learned that some properties have to contend with TWO HOA's rather than one. Have you researched its HOA Rules/costs? "The devil is in the detail".
It's not up to the Seller to provide comps. YOU should try to find the lowest ones you can; anything to support lowering your Offer below the asking price. All the best...
Hey Blake, not sure how many deals you've done so far, but to me it sounds like you are depending wayyyy too much on the seller providing you info. Yes, seller needs to provide info, but you have to run your own #s and verify what they're telling you (i.e. get copies of checks deposited and not just take their word for it). Sellers will always try to show more income than they're actually collecting, by talking about "potential" or pro forma, etc., and always downplay the expenses. After you've analyzed about 100+ deals you'll start to get a feel for what income & expenses should be; this coupled with walking through dozens and dozens of properties (if you've done some renovations, that will also help with what needs to be fixed, which will add to your cost).
Longview, TX · Member since 2015 · 21 posts · 8 votes
10y
@Brent Coombs Sorry, here is the correct link: LoopNet Listing
I am awaiting her response regarding 4/14ths or clear title now, but I believe since the CAD shows appraisals for each unit (#14, 15, 16, 17, etc..) that there will be seperate title for all units.
This property does not have an HOA.
I don't have any agent friends to pull comps for me at the moment, but I am actively searching for one who is an agent and investor.
She did reply regarding the repairs, she said," I'm taking care of any work orders that tenants request as they come in and will continue to until they close. Theres nothing huge needed. The outside trim needs to painted soon but isn't bad. Roofs are good. no leaks.
I just had #14 come open so I'm going through it again and replaced the outdoor storage room doors. It needs some fence work. I've got tenants for it at the $750.
#15 is happy as far as i know. I had the AC serviced and a fan motor on the outside unit had a loose wire. Its fine now but also has an older fence that needs some wk.
#16 is happy. She had a slow drain. Theres a tree in back I've been wanting to get trimmed back. It's fine.
#17 was just gone through and a fresh make ready done this month. Its fine too. The parking lot is concrete so its been no problem."
@Johnny Kang This is my first ever deal. Actually, the first deal I have done an "in depth" analysis on. I am still learning the process of analyzing deals, hence this post. Maybe I am relying too much on the seller. I don't know what's too much and not enough. That's why I am coming here to hopefully get some help.
And sure, walking through dozens of properties will help me with estimating repair costs and whatnot, but that takes time. At the moment, I'm relying on you guys' help while I'm getting more experience.
Also, thanks guys. I really do appreciate you working with me, I know it's a hassle and headache working with a newbie!
Nothing wrong with being a newbie. Everyone starts there. Just be a 20%er and take action daily; the old pareto principle. I'm stoked you decided put yourself out there and post something you're working on.
When you start to really analyze deals (and by that I mean plugging in ALL the line items on a property (income, expenses, financing cost) and doing the same after you've repositioned the property to give you an idea of how it will perform) you'll start to develop a "feel" for a property based on the #s, market, physical condition, etc. As you're learning and progressing, if you ever wonder if you've developed that "feel" for analyzing deals, then you still have ways to go. You'll KNOW it when you've reached that point. (This is important because when a deal comes your way that makes sense, you won't hesitate to pull the trigger while others may be on the fence about what steps to take next).
When I first started analyzing multi-units, I didn't quite know how to calculate expenses, but when you get MLS listings, often the expenses will be shown. Now, they're not always accurate, but it's better than just seeing a listing on Zillow and running your analysis blind.
Also, go look at properties every week. Take pictures (get permission first) and try to put an estimate on renovation cost by going to HomeDepot.com or Lowes.com and see how much you think it'll cost to renovate a kitchen/bathroom etc. Even if it's an MLS listing tt will add to your experience level every time.
A commercial broker brought me an off market deal (10 units: 6 Apartments & 4 Commercial). Within 20 minutes of, I knew this was an A class property in an A class area and wouldn't cashflow the way we'd want to. Few days later, he brought me another off market property (3 family). After looking at the #s and the location, with in 5 minutes I was able to tell him the seller's not really motivated. Just trying to unload it someone who doesn't know what they're looking at. Broker agreed. I got to this point by having analyzed about 150 properties and walking through roughly about 40 properties. So keep at it. You'll get there.
Longview, TX · Member since 2015 · 21 posts · 8 votes
10y
@Shawn Coverdell Why do you say it's a bad deal? I'm genuinely curious! This is why I wanted to get multiple opinions. It's a lot of money to spend and if I don't buy right, it's a lot of money to lose..
@Johnny Kang I will definitely keep at it! I have been doing research, listening to podcasts, reading books and forum/blog posts for months and I have finally decided that I just need to jump in and do it. Just do something to get my feet wet. This was the first property I ran across and I'm just trying to figure out what to look at to decide if it's a good deal or not. I know multifamily properties have numerous points that can make or break a deal, I'm just looking to find out what exactly I need to look at when analyzing these properties.
Does anyone have a spreadsheet or tools/resources that would help me analyze multifamily properties? Even a specific post that you would recommend. Just anything that will give me a good idea of exactly what kind of numbers I need to look at and what info I should obtain from the seller to tell whether it's a good deal or not.
Lafayette, LA · Member since 2015 · 32 posts · 20 votes
10y
I agree it's overpriced. At $750 per unit just using the 50% rule for expenses I come up with a 180k valuation at a 10% cap rate. I find seller always is going to underestimate expenses. Even at only 40% expenses this property is worth about 216k. I would walk.
I agree it's overpriced. At $750 per unit just using the 50% rule for expenses I come up with a 180k valuation at a 10% cap rate. I find seller always is going to underestimate expenses. Even at only 40% expenses this property is worth about 216k. I would walk.
Investor · New York, NY · Member since 2014 · 279 posts · 224 votes
10y
I have a spread sheet if you want. PM me. But it's also good to put one together yourself, which is what I did. It'll help you understand the metrics that are behind how #s are derived at, and how they relate to each other. (Robert Kiyosaki talks about his "Rich Dad" teaching him the importance of understanding ratios and how they relate to one another. I didn't understand what he was talking about at first, but the following might help):
Cap Rate is only one aspect of analyzing a deal. Generally speaking, a low cap rate is found in areas where appreciation is high and conversely, high cap rate is found generally, in less desirable neighborhoods. So you can find a property with high cap rate, but if you were to drive there at night on a weekend, is that where you'd want to live if you were renting from that building? Let alone raise your kids?
And if finding a property with a high Cap Rate is the only metric you go off by, you'll come to see that your ability to utilize the BRRRR method (where you take the equity to put towards the down payment on the next property) is stifled. Cashflow alone does not create wealth. This is the reason why I like a mixture of looking for properties that cashflow an amount that I'm relatively ok with for the time that I have to spend, as well as a property where I can do value-add for forced appreciation, thus being able to snowball that into the next property, then the next, etc.
Find out what your personal preference is regarding the type of neighborhood you'd like to buy (A, B, C, D class neighborhood), then the type of property (A, B, C, D class property) in that defined neighborhood. Then try to figure out which combination will give you the type of financial result you're looking for. Hope that helped in some way.
Longview, TX · Member since 2015 · 21 posts · 8 votes
10y
@Brent Chauvin Thanks for your help! I believe I have decided not to move forward with the deal from all of the opinions I received here of it being a bad deal. Do you mind sharing with me exactly how you got to those numbers?
@Johnny Kang Thanks for that info! I will PM you regarding the spreadsheet. I would like to create my own. I hear that it helps a lot of people understand their numbers better. Only issue right now is...I have no idea how to make a spreadsheet that will calculate all of that at once haha! I'm learning though. I have Excel so I'll go look for a post on how to create one. I'll also take into account everything else you said and recommended. Wish you lived closer to Longview, TX so we could meet in person!
And if you were interested in buying 4 of them, AND buying from a motivated Seller (which doesn't appear to be the reality here), wouldn't you expect a bulk discount too?
It looks like you've already reached the logical conclusion that there's nothing in it for you, but hopefully you're learning a lot, because you are asking the right questions. Keep looking/posting...