All Forum Posts by: Abad Marroquin

Thank you Mario Bellavia. The seller stayed firm at $300k. I use the bigger pockets tool to analyze it. If my numbers are right I should get around 30% cash on cash. I know it needs a lot of work, and I am willing to spend the next 18 months working to rehab the ones that need to be rehabbed. 

First, I had these 14 duplexes under contract for $450K. After I walked the property, found a lot of deferred maintenance, learned that half of the units are in the least desirable part of town and around $100k in repairs and updates. They were collecting about $6,500 in monthly rent, way below market rate.  The insurance estimates I got was $900 annual premium for each duplex (at $140K replaceing cost). At this point the deal did not seem promising at all.
 

 Then I was able to convinced the seller to reduce the purchase price to $300K (33% less). 

Also, I learned that the county has appraised it at $570K for tax purposes. At the same time, I was able to find an insurance company that quoted each duplex at $457 annual premium (insuring each duplex for $60k with $1000 deductible and $500k for liabilities). This is half of what the other insurance companies had quoted me. The reason I am planing to insure this duplexes at $60K each is because I am purchasing them at $21.4k each. I plan to invest  around $10 in each, so basically I will be spending less than $35k for each duplex. I plan to rehab them with an employee.  I think insuring it for $60k should be ok for now (let me know if I am wrong on this). 

At this point I plan to buy these 28 units with a loan of $400k. Purchase price is 300K and $100k for updates and repair. I plan to gradually fix up the units and then raise the rent progressively until we reach market level which is around $425 for 2bd/1bth a month and $500 for 3bd/1bth. I expect to accomplish this in about 2 years.  

When I run the numbers using 10% for vacancy, 10% for capex, 10% for management, 10% for maintenance and repairs, $550 for landscaping, propetry taxes and insurance I expect to get at least $$2,500 in monthly cash flow. 

Since the county has appraised these 14 duplexes at $570K with all the repairs they need, I would expect them to appraise between $700K and $800K after rehabbing them. My plan is to refinance in 2-3 years and get at least $200K to continue investing. I know I will have a negative cash flow the first months but I expect to break even within 5 months. I plan to invest most of the cash flow from then until I fix them all up. 

Am I missing something here? My banker thinks it's a great deal. They have approved the $300k loan and $100k for rehab. 

Thank you John Warren for your input. I have analyzed this dean and I have come to the conclusion that it is not a good deal. I am going to run from it while I can... 

Thank you guys for your thoughts. The owner is an 83 year old retired doctor. I think he has no idea of how his property is.

I have 14 Duplexes under contract in Georgia for $450K. 

My analysis shows a $500 Negative cash flow with the rent roll I was provided using 7% for vacancies, 7% for repair and maintenance, 7% Capital Expenditure, 10% for management. $400 a month for landscaping, property taxes and insurance.

The seller had originally said that none of the tenants had signed a lease and none of them had paid any deposit. 

Today I walked through 24 of the 28 units and these is what I found:

22 of 24 tenants I spoke with said they signed a lease and paid a deposit of one month of rent. Owner does not pay any utilities and does not provide appliances or cooling units...

There is LOT of deferred maintenance.

12 Units are in a better part of town. The roof looked new, probably 3 to 5 years. The interior of the units need new flooring throughout, new paint, some leaking in kitchens and bathrooms. Most kitchens don't have cabinets. 

16 Units are in a much less desirable part of town. I spoke with a local property manager and she said that she would prefer not to manage properties in that section of the city. She does not feel safe there, and some of her contractors who have worked there during the day they tell her that they are afraid that their tools will be stolen while they're working...Many abandoned houses in very bad shape...

The roof need to be replaced within a year in 3 duplexes and the rest withing the next 3 years. Most units need new flooring, and many reported leaking problems in kitchen and bathrooms. They all said they have reported the problem but have not heard from the management.

Rent goes from as low as $195.00 to $375.00. A local property manager I spoke with said these units should rent for $425.00 I would be cash flowing about $3,000 a month when rents are at $425 a month. And of course after I update all units... 

I have some concerns about the potential in this deal. The population of this city has not grown or declined in the last 7 years... Only 120 jobs have been created in 2017 for a city of 34k people... Unemployment is 5.5%.  My bank said they could include the repairs in the loan. I still need to come up with 20% of the repair. 

I am planning on negotiating the repairs needed...

Please any advice or heads up is appreciate!

I walked through 24 of the 28 units and these is what I found:

22 of 24 tenants I spoke with they said they signed a lease and paid a deposit of One month in rent. Owner does not pay any utilities and does not provide appliances or cooling units... 

The current Property manager is doing a terrible job. There is LOT of deferred maintenance.

12 Units are in a better part of town. The roof looked new, probably 3 to 5 years. The interior of the units need paint, some leaking in kitchen and bathroom. Most kitchen don't have cabinets. 90% Need new flooring... (I thought I might try to buy only these units, but seller is selling all as a package. He does not want to divide it). 

16 Units are in a much less desirable part of town. I spoke with a local property manager and she said that she would prefer not to manage properties in that section of the city. She does not feel safe there, and some of her contractors who have worked there during the day they tell her that they are afraid that their tools will be stolen while they're working...

The roof need to be replaced within a year in most of them. Most units need new flooring, and most of them reported leaking problems. They all said they have reported the problem but have not heard from the management. 

Rent goes from as low as $195.00 to $375.00. The property manager I spoke with said they should rent for $425.00

At this point I don't know if I there is potential in this deal. If I buy it, I might not be able to sell it if this part of town does not improve... The population of this city has not grown or declined in the last 7 years... Only 120 jobs have been created in 2017 for a city of 34k people... If I am able to negotiate it to $375k because of the repairs needed to be done, I still will need a big chunk of money to repair since the properties are not cash flowing. I don't know if my bank will be willing to include the repairs in the loan...

Most of the actual tenants will have to leave if I increase the rent. 

I live One hour from this city, so this makes it a little more complicated. 

Please any advice or heads up is appreciate! 

Thank you These duplexes are in the low C neighborhood. I probably need to do just required renovations. I still need to dig more on the market rent to confirm how low these units are from current market rent. 

Thank you . I will definitely ask for estoppel letters signed by all the tenants. 

I am negotiating 14 duplexes and an empty lot (where there was another duplex). Most of them are 2/1. The real state agent says there is no leases on any of the tenants. Apparently the owner neglected on the Property Manager and let him do whatever he wanted. He just sends him a check avery month.  The worst case scenario I am imagining is that all tenants leave the day I close on this property. If this is the case, I should be able to cover all expenses for a few months until I rent them all out. The properties seem to be distressed. All 28 apartments have window units. I got a quote of $4k for each unit to install Central air. I am walking the properties on Monday and will have a better idea of the inside. If updated rents could go up $200 on half of the units and up to $150 on the rest. All duplexes have brick siding. I have the rent roll and when do the calculation it yields a negative $500 a month.   If I update these units I should be depositing in my pocket at least $2000 a month.  What do you thing about the fact that there is no lease on any of the current tenants? Thank you for your help in advance!

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