Need thoughts on my very first offer(s)

8 Replies

Pending me finding my appropriate funding that I am looking for, I am ready to put in my very first offers. They are both for buy and hold and multifamily units in Columbus, Ohio. Would love to hear everyones thoughts:

Property 1:

- 3 - 4 unit buildings (12 total)

- asking price $305,000

- rents are only $450 per unit but it is 100% occupied ( I am assuming the low rents accounts for the full occupancy)

- Taxes - $740/month total

- Insurance - $200/month approx.

- Property Management - $540 (assuming 10% for this, it is currently self managed by the owner)

- Little to no rehab required as a lot has been done in the past couple years by existing owner.

- I will be borrowing for 90% of the cost and my monthly cost on that would be approx. $1,100.

- I will put away 10% for vacancy and 5% for maintenance per month also.

Let me know your thoughts on the numbers and what else I can give here to help people review this.

Property 2:

- 2 - 4 unit buildings (8 total)

- asking price $300,000

- rents are $530 and it is also 100% occupied. These are newer buildings (1986) and have all amenities included.

- The only rehab required seems to be shingles on one and it is not urgent to my knowledge.

- Taxes - $653/month

- Insurance - $125/month

- Property Management - $425

- 10% for vacancy, 5% for maintenance.

I appreciate any and all comments, thanks guys!!

Hey Shaun,

I recommend allocating more like the following:

-15% property management (once you include all the extras, such as leasing fees, it will be more like 15 to 20% since your rent is so low).

-15% for maintenance (this number is irrespective of rents and is more appropriately tied to the sq footage; 15% is a guess).

-5% for capital improvements (capex).

Those last 2 numbers are based on average expenses for Columbus multifamily properties that I've observed over a number of years.

Don't forget there are other (small) expenses such as legal, etc.

-Peter

Hi Shaun,

These numbers seem to work fairly well for what you are trying to accomplish.

Are you seeking a portfolio loan to purchase both with 10% down? If so, which bank because I need to talk to them!

Both properties are fully rented and rehabbed?

Id go with Peter's estimates as they are conservative, anything leftover would be a bonus!

Steve

Hey @Shaun Anderson

One question that I might have of the property related to occupancy relates to the economic occupany. There was an interesting article on BP a few days ago discussing the difference between occupancy and economic occupancy. Essentially asking the owner if anyone of the current tennants are past due or historically a late payer would be something I am interested in. I do not know the market you are in, but with rents being low, it would be a good question to know. Just my opinion.

Best of Luck to you!

Andy

That reminds me - beware of "fully occupied" properties in marginal areas of town. Sellers will often fill them up with anyone who walks through the door in order to make it look full, but it becomes a nightmare if the tenants weren't properly qualified. I would ask to see 12 months of rent roll.

@Peter

Thanks for the comments on the numbers. The reason I used those percentages for my maintenance is that both of those properties have had a lot of recent upgrades and not a lot is required at the moment so I am using a lower percent but I still do want to account for it. As far as the property management amount I guess you would know more about that being that you do that in the city!! Thanks for that. I have accounted for other small costs at the beginning as well.

@Andrew

Thanks for the comments, very interesting. I have quite a bit of info on the tenants but not all, I do believe they have all been there for at least the past year and most have leases signed into later this year or early next for sure. I understand what you are saying for sure though and will ask more when I can. I have been told that a lot of the info I am asking will not be given until I put in a formal offer.

@Shaun Anderson Where you are:What about Heat And Utilities?

Also Curious What are the sizes of the units. # of Beds, Sq . Ft.?

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