Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
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.
@Karl B. Thanks! Yeah, the broker I use is a small office, VERY VERY good it was the owner of the office that noticed it (if anyone is looking for a commercial lender in Portland OR area DM me and I will send you their info.)
Yes, it is a good property..was not run well for a long time, but big units, great location, just needs some more work (and now I have an extra $1000 a month to do it with bwahahahahhah..hhhaaaahhh...ha...sorry
@Karl B. Thanks! Yeah, the broker I use is a small office, VERY VERY good it was the owner of the office that noticed it (if anyone is looking for a commercial lender in Portland OR area DM me and I will send you their info.)
Yes, it is a good property..was not run well for a long time, but big units, great location, just needs some more work (and now I have an extra $1000 a month to do it with bwahahahahhah..hhhaaaahhh...ha...sorry
Poorly run properties are my FAVORITE. They often reek of value-add & a deal to be had.
Now when you turn on a faucet at that place you'll smell money in your pocket. :-)
@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...