Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes
7y
@Account Closed
Looks like you already did RUBS? And it's still not profitable?
Should we assume the rents are totally maxed for the area and everyone is on a 1 year lease already?
Do you have coin op laundry?
Are there storage units? You could start charging $25/mo to use them or something like that.
12% management seems a little steep, especially when you are losing money on it. Have you shopped that around?
You aren't actually spending capex and repairs every month, right? Assuming you are just saving it like you're supposed to?
Looking at that cap rate, it looks a bit dismal. How did you end up in that deal? Please share, this could be a valuable cautionary tale for the BP forum.
Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes
7y
@Account Closed
Looks like you already did RUBS? And it's still not profitable?
Should we assume the rents are totally maxed for the area and everyone is on a 1 year lease already?
Do you have coin op laundry?
Are there storage units? You could start charging $25/mo to use them or something like that.
12% management seems a little steep, especially when you are losing money on it. Have you shopped that around?
You aren't actually spending capex and repairs every month, right? Assuming you are just saving it like you're supposed to?
Looking at that cap rate, it looks a bit dismal. How did you end up in that deal? Please share, this could be a valuable cautionary tale for the BP forum.
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
7y
You can't manage a property on a spreadsheet or with a calculator alone! Don't get me wrong they are useful tools.
It looks like 3 of your expenses are well above the norm. Vacancy 10%, Management Fees 12% and Repairs 24%.
I think typical Management Fees would be 8-10% and 5% for vacancy. So, I would look at what's going on and try towards those more typical numbers. The calculator helped identify where the issue is, but you need to dig into things to solve it.
The repairs 24% is concerning. My hope is that you bought something with deferred maintenance. If so, then this 24% should go down as you get things back in good shape. My recommendation is to make a plan to attack any known issues proactively. Its cheaper to be proactive and fix things all at once than to pay for tons of service calls when things break down.
Rental Property Investor · Calgary · Member since 2018 · 82 posts · 19 votes
7y
@Account Closed how did you find yourself in this property ? If you used a proforma before to acquire it, please post the information to see where the gaps were.
Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
7y
Additional to what others have discussed, you need a new manager or at least new terms. They should not be charging you 12% on a 12 unit. I would consider self-managing but that's not possible if you are in CA. Relook at what you are paying to repair. Is this in a rough area? That would explain the high vacancy and repair percentages.
Probably not what you want to hear, but you still have debt pay down which will provide you with a sizable return when you decide to sell.
Hercules, CA · Member since 2019 · 4 posts · 2 votes
7y
Thank you for all your replies. We bought these units 3 years ago and being inexperienced (before Biggerpockets of course) has cost us greatly. That and having stressful full time jobs have prevented us from fully looking at the situation, however, this has now my complete and full attention.
The down payment shown is not the original down payment, it's how it stands now, I wanted to show the current loan balance and equity somehow. These are 38 year old units and the previous landlord apparently did not ever fix anything right.
We have had a water heater flood, an electrical break box fire, bed bugs and repairs galore, which have contributed to the insurance and continuous repairs being sky high. I feel like we're remodeling this property piece by piece after paying retail for it.
The property management company also is greatly overcharging, that is another aspect that needs to be addressed. I believe it's a case of "when the cat's away..."
Honestly, I'm seriously considering cutting our losses, getting rid of this mess and just starting over. I would love to be able to get a multifamily 1st lien HELOC that would allow me to make smaller payments while being able to use the equity but I haven't found a bank that offers one for multifamily properties.