All Forum Posts by: Ben Ballinger

I redid the numbers on the report with:

- 30 year loan
- 220k purchase price
- 100k rehab costs (I believe I could find a way to save 20k on the rehab if I really tighten my purse strings)

downpayment would be about 20k (3.5%)

Now, the property cashflows at ~$350/month, plus $400/mo that is set aside for property management (that I would get since I would manage the property)

So, free housing for me, plus $700+ in monthly cash flow if I could make those numbers work.

What you're saying about the 203k limit throws a wrench in my plan though. I would love to see the resources you have on that, yes thank you Jeff

Originally posted by @Teddy Smith:

Start with the "Income Approach" to evaluate properties.

 right, but that's not possible without knowing the typical cap rate which as stated is impossible in Worth because there's almost no multiunit sales as it's a small town with a cold market.

Ok I see what I did, I didn't say 0% down loan, i was including rehab cost in the loan which the caluclator doesn't seem able to do, but that actually brings up a question I have:

If I purchase a property for 100k and want to put 50k into the rehab, and use a 203k rehab loan... am I paying 3.5%/5%/whatever % based on the total 150k loan amount, or just the 100k purchase price, while the 50k loan amount is 0% down?

I ask bc the calculator doesn't seem capable of considering downpayment on purchase plus rehab costs... it only gives you option to base percentage off purchase (which seems like a big limitation and should be fixed, @Brandon Turner)

@Brandon Turner - not sure why it's not allowing me to tag you

Hi @Jeff Valentino, not 30k per unit, 15k. The reason I said 120k is because I am planning to build out a 1 bedroom unit and maybe even a studio in the basement, the landlord ran plumbing and did drywall but never converted it to actual units. The new builds would obviously cost mroe than the remodels. I was assuming 35k for the one bedroom, and 15k for the studio. 15k per each of the existing units, plus 10k for various other things, like plumbing etc.  So 15x4 = 60 + 35 + 10 + 15 = 120k.

I ran several numbers with different amounts down, but didn't realize most recent report was with 0% down. More likely I would put down 3.5% or 5%, depending what I can get. Also I am not opposed to 30 year loan I wanted to see what would occur with a shorter-term loan.

I don't think I need 10%, I just like to be conservative with my estimates. Last thing I want is to get into something that ends up worse than I expected... would rather the other direction. But obviously the downside is too much conservatism creates a purchase price that is too low to be realistic.

I consider the 1 bedroom buildout to be part of the rehab and the overall purchase even though its for me and my wife to inhabit, simply because it's necessary for me to get the FHA loan since otherwise I wouldn't be able to have it owner-occupied.

I can run another report with 30 year loan and 3.5/5% down, but do you have an idea on a good number to start at so I can try putting that into the calculator to see what comes out?

Thank you for your time!

@Jeff Valentino i thought maybe you might have some insight or know another local investor who could take a look for me who knows the Worth area :)

I will link a pro forma report I did here so you guys can take a look.  Note that even with a purchase price of 210k it appears cash flow is negative.  I am wondering if i was overly conservative with the numbers.

Also, my wife is a real estate agent so I would be saving costs there if you're wondering why my closing costs are lower than average.

Report Here

Hi REI fam, I'm currently looking at an off-the-market 4-unit apartment complex in worth Illinois. It's owned by a friend of a family friend, who has owned it for many decades and is retiring and wants to get rid of it. I'm having a lot of trouble determining a proper entry point for making an offer. The reason is because there are not many other sales in the area for me to formulate a typical cap rate from. For what it's worth, I have read as much as I possibly can on due diligence for multi units but there appears to be some contrary vice, some people say use cap rate, some people say cap rate is useless, some people say to verify expenses with the landlord before running the numbers, other people say that's pretty much impossible, but the main underlying pattern I see is that experience trumps everything. I've never bought a multiunit before so I can't just go off of my experience here, so I'm hoping someone more experienced can help point me in the right direction. The building is a standard four unit apartment complex with two floors and a central staircase. There's also a full basement. Each unit is two bedrooms, one bath. As is typical with old-school landlords, the units are all on month-to-month rent and way below market value (rents range from 600-800 dollars) The people that live in the units are poor quality tenants: many of them smoke in doors and the building smells like crap, they are very messy and I imagine they are hard to deal with based on my understanding of low rent tenants. I have been unable to enter any of the apartments themselves because they are all occupied, but I am just going to go off the assumption that all four units will need a complete renovation. I plan to kick all of the tenants out immediately and then renovate each of the apartments so that I can attract higher paying, better quality tenants on normal year leases. The reason I plan to kick them all out at the same time is because I feel like they would scare off better tenants if they are still occupying their apartments and smoking in them, leaving their crap all over the laundry room, etc. without seeing the apartments, I am estimating about $15,000 per renovation plus I am building a garden unit in the basement (which I will live in, this is a house hack). Overall I'm estimating between 100 and $120,000 in rehab costs. Another area I can increase revenue is separating the utilities and charging the tenants for utilities; right now they don't pay utilities (of course, and run ac all day when they're not home and stuff like that). When I ran the numbers as best I could, I came up with a purchase price of around $350,000. However, this was not accounting for the rehab or vacancy when I kick all tenants out. I'm wondering if closer to $230,000 to $250,000 would be a better starting point. Perhaps even lower. Worth is not a hot market so I don't expect any appreciation overtime other than value add improvements that I make. I'm much more concerned about positive cash flow. Also, for those of you experienced with different types of lending, would you recommend an FHA rehab loan since I will be living there? Or should I try to go with Hardmoney for the renovation portion and a conventional loan for the initial purchase? Thanks a lot and I look forward to learning more from you guys

Bump

I'm looking for investor friendly contractor in two areas: - Palos/orland townships - bronzeville My main criteria for being "investor friendly" includes the following: - understands the importance of prioritizing an investor project and not stopping halfway through to work on other projects, leaving the investor racking up holding costs - always responds to calls and texts in a timely fashion. Never ignores texts. I hate having to reach out multiple times to get a hold of someone who is working on my property - prices their services at an investor rate, not at a consumer retail rate. Otherwise it's nearly impossible to make a deal work - is willing and able to do walk-throughs of properties and provide relatively accurate estimates for the scope of work discussed. Can perform preliminary inspection to determine hidden costs such as foundation issues, termite damage, HVAC issues etc. - can complete jobs quickly and on schedule. For a typical three bed/2 bath, I'm looking for the entire project to be done in eight weeks or less give or take depending on the complexity of the rehab. For a typical three flat gray stone (bronzeville), project times would obviously be extended further. If you know somebody that meets these qualifications who is on BiggerPockets, could you please tag them in the response so I can connect? I appreciate it!

Does anyone have a strong presence on LinkedIn, using it for posting materials, networking, etc as a significant source of their marketing efforts?  If so, any tips on getting started? I have had a linkedin account for like 5 years and have not used it at all since I've owned my own business, other than adding my facebook friends and connects (which is pointless because I never visit the site).

I would particularly be interested in any sort of tutorial type series geared towards investors on using LinkedIn, but also any personal tips and tricks are appreciated.