URGENT Advice Needed - 19 Unit Property

121 Replies

Originally posted by @Neil Nylander :

The "6 Store Fronts" are a twist - could you describe this a bit more? 

Also, how will the properties be managed moving forward?

Regards

 1 of them is a dry cleaner, 2nd unit is a day care and the other 4 units are mixed. 

The property manager currently has a unit that he doesn't pay for. He manages all units, snow removal, issues with the building etc. 

Originally posted by @Luka Milicevic :

1- how on earth are taxes so high?!?

2-$166/mo maintenance for 19 doors is a joke. That's not realistic on any planet especially earth. The only way is if they are on NNN leases which isn't the case in residential real estate.

3-none of this factors in vacancy reserves

4-didn’t see a line for capital expenses. 

I’m scratching my head at how high taxes are. 

The avg exp ratio across America is 47%. I would more so use that as a benchmark vs the 32% you have. 

Just my thoughts 

Hi, thank you for taking the time to reply. 

1. It's north jersey, taxes are high. On 2 of my multi fam houses i pay 10K each. In this case im buying the whole block. 50K is not a lot for what im getting. 

2.  The property is VERY well taken care of. Everything is in tip top shape. Tenants there are all there for at least 5 years and they havent had many problems. 

3. Understood i will revise those numbers. 

Originally posted by @Gary Barella :

Dig in to how seller finance works my man. This is the perfect scenario because you personally know the seller, will get them their 2M, take the problem off their hands, and put next to nothing down. Don’t screw this up, half the members on here would kill to have this opportunity. And value is only going to skyrocket in Bergen County. Might be tough grinding it out for first few years but you will be set in years to come.

I have done some re-search on this. This is an extremely good idea. I might have a shot at this if she accepts to go this route. 

Im working hard on getting this deal and hopefully it will work out. 

Thanks!

Originally posted by @Dan McCahan :

@Daniel Daskaloski

With that many properties, stuff happens. Your only getting 3k monthly net using you numbers above. Do you have money resources from your current job to cover an unexpected large capital expense early in the deal? You’ll need to have some reserve built up

Dan, yes i do. I have multiple other properties that bring in money, plus i own a few cell phone repair stores etc. The income is there to cover if these issues do arise. 

Originally posted by @Michael P. :

You come to america to make great success. HELOC all you houses, sell your rentals, cash out your 401k, sell car, sell TMZ, get your 500k.

Mike, 

I am assuming i know you from the web hosting world :)

I am currently working on HELOC on all of my houses. But that will take a bit. I want seal this deal.

TMZ has been sold some time ago, thats how i got my first few properties :). 

Thanks

So this is how I am looking at this: 

1. The current owner is charging everyone rent that is way under what it cost to live in Bergen county. The numbers you are seeing are the real numbers that the property gets. I can easily make an extra 2-3K off this property after i buy it without any major changes. 

2. This deal is basically a whole block. There is space to build at least 20 units in the vacant space available. The city that this is in is big in developing right now. 

3. I am looking at the future of this deal, even if it brings me 1k in profit a month now i dont care. There is a lot of potential down the line. 

Also i am a little confused on how 5/30 works. Online it says this: 

The number of years over which you will repay this loan. ... For example, a loan with a 5-year term amortized over 30 years will have the same monthly payment as a 30-year loan with the same interest rate. The difference is the 30-year loan will have equal payments for 30 years.


How can a loan be repaid in 5 years if the monthly payment is the same as a 30 year, i am not understanding this well. 

Originally posted by @Daniel Daskaloski :

So this is how I am looking at this: 


How can a loan be repaid in 5 years if the monthly payment is the same as a 30 year, i am not understanding this well. 

 Its a balloon payment. So you pay monthly mortgage based on the rates of a 30 year loan. But instead of getting to pay that for 30 years you only get to pay that rate for 5 years. At which point you either do a balloon payment to pay off the whole thing or get it refinanced. 

Just re-looked at your numbers and the expense for maintenance seems very low. $167 for 19 units?

I'd re-run the expense numbers to ensure you are properly accounting for repairs needed

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Sounds like an amazing deal. +13K/month profits

All you'll need to do now is to quickly raise capital - how about friends and family? Since it's time sensitive, I would probably be offering a more lucrative position to investors (ie. no charge for your management fees or very low and they buy pure equity in the property. You'll probably just hire a property manager anyway who can look after these for you and deduct that from the business income.

@Daniel Daskaloski

I recently had a 5/20 proposed to me. As I understand it it’s basically a 5 year balloon loan based on a 20 year amortization. You pay p and I for the 5 years, principal goes down. Year 5 the loan resets at a new rate, say prime plus 1. Assuming you are holding up your end the renewal is a formality

Originally posted by @Dan McCahan :

@Daniel Daskaloski

Can you sell the vacant land to pay for this deal? If so you could work out a bridge loan for the 500k, sell the land, pay off the loan and if there’s money left over buy down your principal

Sure i can, but that vacant land opens up for a lot of development down the road which is where the real money is. 

Its basically the whole block of property. 

Originally posted by @Dan McCahan :

@Daniel Daskaloski

I recently had a 5/20 proposed to me. As I understand it it’s basically a 5 year balloon loan based on a 20 year amortization. You pay p and I for the 5 years, principal goes down. Year 5 the loan resets at a new rate, say prime plus 1. Assuming you are holding up your end the renewal is a formality

That makes a lot of sense, thank you for the information. I just read a bunch of articles and saw videos on how this works. 

Thanks!!

This is one of those deals where you just pay and lock the contract up and worry about everything else. Bergan county, you can't go wrong. 

Please lock this deal up and let us know how it all goes.

You will raise the money. Also, since you know the seller i would certainly ask for owner financing. We do this in small motel all the time.

Put 20% of 2 mill and ask them to carry it for 10 years. Increase the value , sale it for higher price or refinance to keep and pay the original owner off.

Good luck!

Ben

@Daniel Daskaloski Dan, you are going to get this deal based upon the relationship you have not the numbers. Get it under contract for 90 day due diligence and let the lender and appraisers do the heaving lifting on the value. People who have $500k to invest want control and most of the profit. I can tell you the real money in this business is made in finding the deals not having the money. 

Thanks, David

Originally posted by @David Miller :

@Daniel Daskaloski Dan, you are going to get this deal based upon the relationship you have not the numbers. Get it under contract for 90 day due diligence and let the lender and appraisers do the heaving lifting on the value. People who have $500k to invest want control and most of the profit. I can tell you the real money in this business is made in finding the deals not having the money. 

Thanks, David

 David, 

I did not think of this. So basically before someone else jumps in this deal i can get it under contract to do due diligence. Do i need to put any money down for this or i just need my lawyer to write the contract up? 

Thanks! 

Originally posted by @David Miller :

@Daniel Daskaloski, first off don’t get lawyers involved yet, just do a simple contract with the minimum amount the seller will accept. I don’t know how close of a relationship you have with the seller, but the fewer the people the better at this time.

 Who would write up or where can i find a contract like this? 

Those numbers just don't seem right. I'm also have trouble wrapping my head around the 40k in repairs and it adding 240k in value. I feel the numbers have been used liberally instead of conservatively. I just looked at a similar deal in my area for around 2.4m. After financing and all operating expenses I stood to make only 11k a year fully rented. If any of those units go vacant you could run into some issues. Keep focused and invest with your brain , not emotions.

Keep in mind that if you're willing to finance out 2 million like that, could you make more cash buying several different properties for less?

Originally posted by @Stephen Chaney :

Those numbers just don't seem right. I'm also have trouble wrapping my head around the 40k in repairs and it adding 240k in value. I feel the numbers have been used liberally instead of conservatively. I just looked at a similar deal in my area for around 2.4m. After financing and all operating expenses I stood to make only 11k a year fully rented. If any of those units go vacant you could run into some issues. Keep focused and invest with your brain , not emotions.

Keep in mind that if you're willing to finance out 2 million like that, could you make more cash buying several different properties for less?


Stephen, 

Can i make more cash buying several different properties for less? Yes, BUT: 

1. Buying those properties in the area this is located would take a long time, a lot of hard work, looking at dozens of houses a month etc. The multi family's in this area are extremely hot, you cant get even close to it. Investors are putting a lot more money than the property is worth just to add it to their portfolio. 

2. I am looking into the future with this property. You are adding a big chunk to your portfolio with one purchase. 

If i cover ALL of the expenses and i make $100 a month of this whole property i am fine. I know that within 2,3,4 years i can easily get another 10K off of this property in PROFIT a month. 

There is a lot of potential, an empty lot that i can build multiple units on. 

And honestly, if an apartment does go vacant, its great. It gives me a chance to renovate it and bump up the rent another 300-400 a month. I can easily rent it within 2 weeks. 

Everything on this property is currently rented out 25-35% LESS of what the market currently is. 

Thats how i am looking at this deal, and i think it makes sense. 

Dan

Will property taxes double if reassessed to what you pay?  Im guessing its currently assessed around 1 mil. if taxes are 50k.  

@Daniel Daskaloski

I guess your Maintance cost is low due to the fact the tenants are paying way less what they will pay somewhere else in the that area.

I have heard of this scenario where tenants have been living there for years without any rent increase so they tend not to complain a lot and take it upon them self to fix stuff because they know if it will cost you to fix it, it will cost them to pay more rent.

So please keep in mind when you decide to tweak numbers and increase rents you might see increase in cost of maintenance.

I hope your deal works well for you.

Originally posted by @Emad Nasser :

@Daniel Daskaloski

I guess your Maintance cost is low due to the fact the tenants are paying way less what they will pay somewhere else in the that area.

I have heard of this scenario where tenants have been living there for years without any rent increase so they tend not to complain a lot and take it upon them self to fix stuff because they know if it will cost you to fix it, it will cost them to pay more rent.

So please keep in mind when you decide to tweak numbers and increase rents you might see increase in cost of maintenance.

I hope your deal works well for you.

 That is absolutely one of the factors. 

Thanks for the input!

Dan

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