Real Estate Agent · Clinton, MD · Member since 2009 · 54 posts · 18 votes
12y
@Pavel
Is there anyway you can increase the income and bring down the expenses? Is there any income from the garage stalls? If not could they be rented out to generate additional income? What about vending machines etc.? From the look of things, the expenses are 66.4% of the income, on the other hand the purchase price seems to be out of sync - the maintenance costs are high indicating that there must be some thing going on - Too much for a 20 year old house. Find out why. In my opinion, at this price, this is an aligator - but which, at the right price may become a great deal.
In doing so, remember though that many a time, some great deals come disguised as ugly deals - the key then is to find the problem, resolve the problem and bingo!!!
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
12y
Your insurance looks to be pretty low. Are the utilities for only common areas or all the units? Is that per month or year? Those numbers seem lretty low!
Wholesaler · Westminster, CO · Member since 2013 · 224 posts · 77 votes
12y
Pavel, a deal is where you cash flow. Purchasing an apartment building(s) is different than purchasing 4 or less units. However you probably already know this, and it's important to still understand your ROI.
Use the Bigger Pockets Property Cashflow Analyzer:
There are other spreadsheets available for apartment buildings as well - take a look to find out what works best for you. I have modified for my purposes and works well to understand the numbers quickly.
Also, when you take this to the bank, they will ensure you have enough cash flow to make the deal happen as this will be a commercial loan. I know all of this is general information, but what makes it a good deal depends on your point of view and ultimately what the bank sees as a good investment. make an offer what you think is good; with contingency of financing... this way you can lock it up and iron out the details with the bank.
Your insurance looks to be pretty low. Are the utilities for only common areas or all the units? Is that per month or year? Those numbers seem lretty low!
Elizabeth. thanks for the input, I am looking around to get a more accurate insurance quote for the building.
The $1,500 (estimate) is per year for insurance.
The utility is for all units, Owner pays the heat, water, and common areas.
Investor · Virginia Beach, VA · Member since 2012 · 244 posts · 69 votes
12y
Unless you put some serious cash down I have a feeling you will have negative cash flow. I have a similar cost property 335k purchase 30yr and rate of 6%. My payment is 1800/month PITI. That is 21600/yr. Also that is with 25% down.
Short answer if those numbers are correct it isn't a good deal
Unless you put some serious cash down I have a feeling you will have negative cash flow. I have a similar cost property 335k purchase 30yr and rate of 6%. My payment is 1800/month PITI. That is 21600/yr. Also that is with 25% down.
Short answer if those numbers are correct it isn't a good deal
Thanks Sean, that is what I am seeing as well. But what price would be a good price for it? I did the spreadsheets and to cashflow $730/month, I would need to buy it for $190,000 plus 25% down at about 6% 30 years...
I just don't see how this could be a good deal at all, using the numbers given by agent for expense, rents and taxes....
If I set $100 cash-flow per month per door, is that a good rule? If so then this property just wont cut it unless it is less than $190,000 but that seems crazy...
Real Estate Agent · Clinton, MD · Member since 2009 · 54 posts · 18 votes
12y
@Pavel
Is there anyway you can increase the income and bring down the expenses? Is there any income from the garage stalls? If not could they be rented out to generate additional income? What about vending machines etc.? From the look of things, the expenses are 66.4% of the income, on the other hand the purchase price seems to be out of sync - the maintenance costs are high indicating that there must be some thing going on - Too much for a 20 year old house. Find out why. In my opinion, at this price, this is an aligator - but which, at the right price may become a great deal.
In doing so, remember though that many a time, some great deals come disguised as ugly deals - the key then is to find the problem, resolve the problem and bingo!!!
Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
12y
Be leery of owner paid heat in Green Bay, WI. It gets colder than a well-digger's elbow there. Those figures for utilities seem low to me, but you can usually just call the utility company and ask for the last year's average monthly cost and they'll tell you the actual numbers.
Bellevue, WA · Member since 2014 · 183 posts · 86 votes
12y
@Pavel S. After a quick look at thee numbers, it doesn't seem like a good deal to me.
The deals that provide good cash flow are going to be hard to find in this market, but not impossible. When buying-and-holding, it is the quality of the deals you make and not the quantity.
I want to applaud @Nii Okai for pointing out creative ways to provide cash-flow.
Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes
12y
75k is what I'd pay for this place. I'm looking to make $100/door though.
At 137k, you get 15% cash on cash return from your numbers. I echo the "your heat expense looks WAY too low" comments from above. I'm guessing you are using pro forma numbers for the heat? I'd ask to see the last 3 years worth of bills from the oil/gas company.
The best way to make this a good deal is to transfer the costs to the tenants. Electric heat is a good way to do this without having to do massive renovations. I was able to put baseboard in for about $1300 for a 4 room, 1 bedroom place in one of my buildings.
It will probably cost you a few tenants as well as dollars. Adding that cost to their monthly budget is something they may not be prepared for. Plus some people's reaction to any increase in cost is to simply leave.
The big thing here is not to buy this place, or any deal, just because it looks cool. I always look a deal like this one to see if I can make money tomorrow. Can I write a check, make my numbers and not have to touch this place again? Once that is satisfied, I find ways to make the place cheaper to own.