HOW to save $1000 a month- Leak Search and 3 toilets

[Richard Sherman]

In mid-August, we closed on a 32 unit property just west fo Salem OR (About an hour south of Portland.)  11- Three Bedroom units, 21- Two bedroom units, backed up to the elementary school, awesome location and room to build another 12 units.

During underwriting, the loan officer and I independently saw the utilities were off...a lot...the area has relatively low water/sewer costs and these were running around 7% of gross rents.    I figured there were leaks etc somewhere.  We have used a leak finder specialist on other properties and had great success.  This time was no different, we were losing 6 gallons A MINUTE....culprits ended up being 3 bad toilets and a couple of small water heater leaks into the crawlspace (I knew about those form the inspection.)

Total repair and labor cost, around $500 MAX.  Leak search was $350.  We just got the water/sewer bill today and it was $1011 LOWER....and the city gave us a $600 credit for fixing the leak.

SO, in summary....160,000 gallons of water per month saved (1,920,000 per year)

$1011 per month at 7% cap rate means that repair nets a increase in value of 14.285 x (12 x $1011)= $173,305.62

Which is sort of like finding another 1.5 TWO bedroom units.

[Richard Sherman]

@Karl B. EXACTLY.  Properties run by mom and pop with low rents and some deferred maintenance are my favorite!

It was on the market for about a year.  The seller did well, they bought it 3 years ago, put almost nothing into it but got it fully rented, made probably 600k on it when they sold.  I wish I had seen it back then, they got a steal...then again I did not have the ability to buy it back then either.  Crazy how fast the snowball can build.  Went from buying 10 a year or so to this year going to be 58...