All Forum Posts by: Bob Langworthy

And a good rule of thumb when buying investment property is to ALWAYS doubt their figures and run your own numbers. I don't mean to imply that all sellers are trying to pull one over, but it's a major purchase and worth taking the time. 

Some common items that would throw their figures off:

1) Maintenance. Their numbers could be low if they have deferred maintenance or high if they have recently completed projects.

2) Income. Get the rent rolls, tax returns, current leases. Are they leasing at competitive rates for the area?

3) It only takes a phone call to find out if property taxes are current.

4) If you don't know the area, take the time to walk the neighborhood at night.

5) A good inspector is worth their weight in gold.

6) Mowing/plowing. Have they been doing it themselves? Will you?

Hope this helps!

I run my rental building in QuickBooks desktop. Each of the four offices has its own class, the parking lot is its own class, and overhead has its own class. It works great for me. Hope this helps!

@Jason Ray Richardson, that's a great question. My building was empty and had been empty for more than 2 years due to mismanagement and decision by the prior owner (and a general state of disrepair of two of the units). But, I was going to move my accounting practice in to one of the offices, so I knew that I would have one good tenant. My goals for the building were:

1) Within 1 year net $500/month with 25% vacancy. I didn't hit that goal.

2) Within 2 years net $1500/month with <10% vacancy. I would have hit the 2 year goal in 2017, but spent $5500 on heat pumps.

3) Within 3 years net $2000/month with no vacancy. I'm projected to hit the year 3 goal barring any additional unforeseen CapEx expenditures. Building is fully occupied.

Those figures are net cash, not NOI.

In addition to the four units, I also lease out 4 parking spaces at $60/month. 

Jason Ray Richardson it will depend on your risk tolerance, purchase price, cash in, necessary improvements, rents for comparable space, and many other factors. As I mentioned before, it can be difficult to find tenants. Residential landlords have much shorter vacancy periods then commercial landlords. If one of those offices goes vacant, there goes your profit. Plug the figures into the rental tool and let that help drive your decision. When I bought my commercial building, I wanted it to be profitable with a 25% vacancy rate. I know that's high, but I wanted to be safe. I also knew what improvements needed to be made and how long I could pick them. Take the time to have a thorough inspection and make a list of projects that you need to do. And schedule those over the next few years and with that cost into your calculations. Hope that helps!

$200 in profit per door for a multi family is a good rule of thumb. But that seems low for commercial. I will be getting twice that this year for my commercial office building. One major caveat: it took me a year to fill the last unit.

Cost basis and depreciated over 27.5 years. TurboTax would let you do it either way. It would probably be worth paying an accountant to do your return for the first year. Then you can decide whether you want to do it yourself after that. Hope that helps!

Great show. I hope you can get a solid hour from him at some point. But maybe he'll be too busy hustlin' for that!

For me, it depends on the source of the cash. For example:

1) When we bought our commercial building we had a 20% down payment and paid cash for some improvements. That total is included in my "cash in" side of the CoC calculation.

2) Last year I added heat pumps to two of the offices. That was done with profits from renting offices, so I did not include that in my "cash in" side of the CoC calculation.

3) If we had a major project to do that included more cash from us, I would add that to the "cash in"

Hope that helps!

I'm an investor and accountant in Brunswick and have found BP to be very helpful. There are lots of posts here on screening tenants. What class property is it?

My approach is simple: 1) Stock market: I invest in mostly mutual funds and a few stocks. I'm okay with some risk and I have a long time horizon. Always looking to beat the market. My Roth IRA was up 25.6% last year. 2) Invest in local real estate in a market I know. Greater likelihood of finding a great deal and getting great returns. With this approach, I don't invest in REITs. As others have said, a REIT seems like an investment for someone who wants to have some exposure to real estate. I don't want exposure, I want the title!