This is my first post, my first purchase, my first foray into real estate investing.
AND I AM TERRIFIED EXCITED!!!
I would love to hear any input from the sages here and become an active member of the community. My goals with investing are to create a 6 figure cash flow after all expenses (including mortgage, insurance, vacancy, etc).
I live in a remote village in the Bush of Alaska. I do not know if I will be here long term and there are numerous complexities in attempting to acquire and maintain property here, so I've decided to invest remotely. Because of this, I feel that I need to utilize a property manager.
I am purchasing a 4-plex in Anchorage, Alaska. I would rate the neighborhood as C, it reminds me of the places that I lived in college. The list price was $350,000 we negotiated down to $330,000 (This should satisfy the 1% rule, I am still trying to get a good enough feel for the numbers to not utilize this as a crutch). There is some CapEx that I'll need to put in come Summer, but nothing structural or safety related. The inspector said, "I would buy this property."
I utilized a spreadsheet from Roofstock to help organize the numbers. I am hoping that I’m being sufficiently conservative, but I am hoping that I can realize more cash flow than this for such a substantial outlay of cash.
% effective rent
Repairs & Maint
Cap Ex Reserve
Assumption (% effective rent)
Income - Expenses
Income - Expenses - Debt Servicing
Net Operating Income
I’d love to hear your thoughts and I am hoping to improve my ability to analyze and execute on increasingly profitable deals.
Thank you for reading!
There was an error when submitting... I was trying to post this to the Multifamily Forum... Maybe I can contact an admin to get it changed.
@Sean Davis congratulations on your first investment! I have an idea of the property you may have just purchased. Looks like you’re probably off to the right start but it’s hard to say for sure with the info provided.
What sort of additional information would be helpful?
Hi @Sean Davis ! Your expense ratio is slightly higher than 50%, and all of your numbers actually look pretty close to what I would expect in Anchorage. We could go round and round over a % here or there, but in the end, this is just a planning tool, and meant to get you into the ball park to make your educated risk decision about a property.
It also appears that you've put enough of a down payment on the property to make it cash flow. That's a good thing and will help you weather all of the unexpected expenses that will undoubtedly crop up.
An entirely different discussion is if you are happy with the return on your downpayment as an investment. I'm estimating that you're at about 24% if your property performs as advertised, which should make most investors plenty happy.
What village are you in?
Hi @Allen S. . I live in Bethel, but am travelling to Tununak... weather permitting.
I'd be very interested in seeing if there is any way that I can reduce my expenditures on utilities... that seems to be killing me. The property management is also expensive, I've heard some rumblings about the group that is currently running the property, but I don't have any other contacts and I am cautious to rock the boat right away.
@Allen S. - On paper - looks good - but at this price point - he's 99% likely to have bought in the worst neighborhoods here - Mt View or Fairview (that you yourself wouldn't buy in, am I right?).
I wish you the best of luck @Sean Davis - but if you weren't warned about the downsides to these areas - then I feel for you! If your annual cash flow is 1k in a bad area - the juice is probably not worth the squeeze. IF the property was in such great shape and has such good cash flow - why did the seller take another 20k haircut on a lower priced property? Because they wanted out... again - if you went in eyes wide open with some caution from your advisors - then good for you - and with active eyes on the project - you'll do okay. But you won't see the appreciation the rest of the city has. Every investment is an opportunity to learn! The inspector said he'd buy it - how many Mt. View fourplexes does he own? Smart money is on none.
@Sean Davis - I was actually thinking that your management was a tad low. I would estimate 8% vacancy, 10% management, and at least 2.5% turnover, maybe more. It was good to see that you had line items in for some of that above, and hopefully you can hit your targets. Like Jamie alluded to, depending on the neighborhood, you might find that more challenging than you think.
@Jamie Rose - you're correct. I am not a fan of investing in Mt View for many reasons, although the price and details make a lot of difference. Also the question here was not one of if buying in a C-class neighborhood was a good decision. Sean has already made that call for himself, so I found no need to second guess why he chose to do so. On paper he looks ok, it sounds like he put money down, and even if he makes 1/4 of the NOI that he is expecting he will still be above water. 80% LTV on a $330k 4-plex is a much different situation than 96.5%+ LTV on a $450k 4-plex in the same location.
@Allen S. - his Cash flow is supposed to be: $89 a month. I don't know how much cash he invested to get that. NOI is a calculation for CAP rate returns BEFORE debt servicing. His Cash flow he is estimating is to be like $1,000 a year. So I think you misunderstand his expected returns.
And my main concern is: I feel for first time investors when they buy in rough areas, IF they have not been fore-warned of the pros and the cons. You're right, 330k is a decent starting price - and he should be able to make some money. Only time will tell if he couldn't have done better.
@Allen S. The property is in mountain view. I have been warned that it presents challenges. I drive the neighborhood and I do like the street that I'm on, but recognize the climate of the neighborhood is... Disreputable. I was told that I'd have to put 25% down, it being an investment property. That puts me in for about $100k.
@Jamie Rose - I am nervous investing in a lower rent area. I've been following the market for months and consulting with an agent in town, this property is the best one I've found on paper by a wide margin. It's my first investment purchase, first time working with this realtor, remote, but I remain optimistic.
I don't love the anticipated cash flow, and will be constantly looking for ways to cut costs and increase revenues. I don't know that the market can support much higher rent for these particular units at this time, though. Current rents are $850-900 on a 2bed/1bath.
If anyone has any insights into Mountain View rentals, I'd love to connect with them.