All Forum Posts by: Charles Williams

Welcome to BP Aaron,

 A bunch of great folks from the area on the forums. I lived over 8 years in Abilene when I was flying for the Air Force, and happy to provide any insight for your military objectives.  @Dawn Brenengen is originally from Fayetteville, and I down the road so you have some good resources here.  Feel free to reach out anytime.

@Jerry Lucker

Great tip. I was out looking at a mobile home a few weeks back and I was trying to find the sticker with the VIN# to match/verify the title owner showed me. The owner didn't have a clue and I couldn't find the paper anywhere.  I didn't think to look under the kitchen sink...

@Kenneth Picha

Congrats on your offer acceptance,  I'm sure you're excited.  Please keep us posted on the progress.  I've considered self storage also but haven't taken the time to research the ins/outs yet. How did you find this property? Mind sharing a few details on how the numbers/analysis work?

@Derek Parsons

 Welcome to BP, you've found an incredible resource.  Hopefully you'll have some downtime to educate yourself while you're deployed.  I know firsthand how tough it can be fighting for a computer if you're using the mwr tent, hopefully you've got some Air Force guys taking care of you...they were always the best facilities, lol.

I'd recommend you find one or 2 areas to research, you can even start networking/building connections while you're there, and hit the ground running when you return.  Your side of Raleigh is booming, and at a price point that's attractive to a lot of people.

Feel free to give me a shout when you return.

@Justin Hackney

I'm neck deep working a VA approval and discovered some constraints with the guidelines, but overall its a great program as @John Upperman indicated. I actually bought my first home, which was a duplex, many years ago with VA and still have it today. You may pay a higher fee each time you use it, but you can keep the loan intact once you move out. The Streamline Refi option is also a great feature years down the road. At these very low rates, the benefit of keeping your capital for other investment options (at probably much higher returns than your VA loan rate) is hard to beat, especially with cash flow to cover the expenses via a multifamily property. Another feature is if you happened to receive any disability rating from your service, the funding fee is (usually) waived. You should weigh opportunity costs, amortization of the funding fee, PMI, etc for your best personal solution.

Once you find a local bank/mortgage broker that specializes in VA lending, you may want to ask about the work history. My broker claims they need 6 months to count my spouses income for VA, but conventional/FHA requires 2 years. And I HIGHLY RECOMMEND a lender with a local underwriting team, to address any unique issues that will inevitably pop up as you approach your closing date.

Hi Andre, welcome to BP. There's lots of helpful folks here and endless amounts of information. Take some time to read through the forums and get an idea of what interests you most.  What city are you living?

You might consider reaching out to some local BP members to learn about a local Real Estate Investment/networking group.

@Rina Amir

@Radhika M. is correct with her guess in that the equation you're using is assuming 30% expenses, leaving 70% of total income as NOI. Then you'd apply the 10 CAP (or whatever CAP you're assessing).

Assume a full 50 lot park, $200 lot rent, 30% expenses:

50 * 200 * 12 * .7 / .1 = $840,000 rough valuation

However, I need to stress that is used as a guide to cull the parks priced way out to lunch, and many variables go into this assumption and 30% expenses are usually applied if the park has all tenant owned homes, with tenant paid city water & city sewer.  Expense assumptions should be a lot higher otherwise.

@Michael Quarles

Thank you for this detailed script.  I listen to your podcasts daily,they're excellent!

May I ask a couple clarifying questions?

1. What CRM are you using which this web form populates?

2. Above you state "Keep in mind this is for hign volume calls".  Why only high volume and how/why would it change for lower # of calls?

@Serge S. 

Thank you for your perspective. A local operator definitely brings value of their own. It’s similar to us SF landlords that self-managed to cut our teeth and held on to the properties until the market allowed better deals to be found where we could cover property management costs.

@Brian Burke your comments about capital structure are very valuable. As I chew on this one, it seems as though the seller may be interested in carrying paper, which would completely change the financial dynamic and opportunity. In a strict syndication model, any returns from pure monthly cash flow certainly aren't there, or won't be until stabilization 18+ months away. However if the seller is willing to finance, and allow deferred payment for several months to allow increased occupancy and income, might there be some value in increasing the property value through stabilization then selling after 2 years after the NOI has increased?

I guess the real challenge is fully understanding whether the NOI is in fact negative or not. As @Ben Leybovich started this post with, the real lesson may be that us newbies that use an income/expense ratio on these lower Class/lower rent properties endanger themselves from the true expenses. I used 20% vacancy with 60% expenses at 10 CAP and see some potential value. I thought these were somewhat conservative, but I'm evidently missing something else.

@Steve Olafson 

Thank you for the insight.  Are you finding similar underwriting issues on your side of the country as well?