All Forum Posts by: Dan Cho

Hi Sheeva welcome to bigger pocket. From a purely financial perspective the choice should be easy, you should be buying as even if you get a great deal on a cash flow property you would just be handing over that income over to your rent. Be advised though Bay Area is the hottest market in the nation thus cap rates are extremely low 2-3%. 

Tough question when to buy, everything can be looked through hindsight. Think of it like the stock market if you could predict it you be a billionaire. Look at it as a long term investment and base your numbers on this. Also I recommend looking at a FHA loan where you can put down 3.5% down payment.

Hi Aryelle so I would personally analyze this deal by looking at how much cash are you going to be getting from rentals? then you have to minus all the expenses taxes, insurance, etc. Finally start looking at the debt, what is the loan term aka is it 5, 10,20, or 30 year loan? find out what your monthly payments are going to be on that. Then for your friends loan, ask what your friends terms are? Look at what current bank loans rates are I think there around 3.5% thus anything close to this would probably be considered a good deal. Good luck.

Look at the video on analyzing properties. They'll provide a lot of numbers and to see what properties are renting for personally I use craiglist to get a gauge of an average.

@Ned Carey Thanks Ned for your input. I used the rental property calculator to do some projections. Also I wanted to buy a motel because I've been wanting to buy a motel for a while, and I figured this was an excellent opportunity to get my feet wet. Love to get your input on some of the numbers that you think might be to low. 

https://www.biggerpockets.com/calculators/shared/539737/75bb06e5-d99b-45fb-b0c0-9ead217b4f19

@Ned Carey  Hi Ned thanks for replying to my post. So for trash I would be using my parents businesses trash so wouldn't be payhing for anything. Maintenance, Lawn, and maid service will be mostly be taken care by onsite gentlemen who receives $75 weekly.

As for running the motel I will be running the motel myself. I will also not be living at this motel which would allow me to rent out the 2 apartments that are occupied by the owner and his family. These apartments can be rented out for $850 bringing in an additional $20,400.

So for NOI I would calculate: $100,000(reveniue)-$2,500(linen service)-$5,641(electric)-$990(water)-$2,800(insurance)-$3,360(maid service)= $84,709

Now I understand there might be some other expenses like the mini soaps and such, but I don't think these would be major expense. Also owner claims income of $66,000, but renting out 2 addition apartments would be bringing in $86,400.

From my understanding with the caluclations above it would be VALUE=$84,709/.20(CAP RATE)

VALUE=$423,545

Do you think I'm being to optimistic?

@Chet Mazur, yes seller is willing to provide all documents to prove all of his sales and renovation work that was completed. I was thinking of Value=NOI/Cap Rate so we would get $500,000=$100,000/.20(cap rate). What do you think? I was thinking if I could get the property for under $500,000 this would be a pretty decent deal.

Hey Jacob,

Welcome to BP. Most of us like you got into real estate out of necessity or family member was in the business. I would recommend that you utilize your father knowledge with his knowledge of the local market and use BP to supplement that knowledge. 

Also FYI property was recently assessed at a value of $220,000.

So I recently came across a apartment/motel opportunity in upstate NY. So their are 2 properties, one is basically a building with 3 apartments inside and the other building is a 9 unit motel. So basically here are the details below:

Asking Price: $575,000

2014 Revenue: $71,000

2015 Revenue: $100,000

Jan-June 2016: $55,000

2015 Laundry Cleaning Service: $2,500

2014 Laundry Cleaning Service: $1,680

Electric 2015: $5,641 yearly

Water 2015: $990 yearly

Insurance 2015: $2800 yearly

2 Separate Buildings: 1 has 9 motel room and 1 has 3 apartments

-Owner claims that 1 apartment rented for $850 and uses 2 apartments for family. Rent on this unit is below market and I believe rents on apartments can be $900-$1,000. Also I won't be living here so I can definitely rent these units out. Motel rooms currently has 3 people living there long term and charges $250 weekly.

-Owner claims about 90% occupancy thus doesn't advertise on any of the major booking sites other than google.

-Owner claims that room cleaning, maintenance, is performed by one of the tenants who he pays about $70 on average weekly.

-Major renovations have been completed since purchase in 2012, new roof, new HVAC, new bathrooms, new pluming, new insulation, new 32'' tv, etc done on both properties.

-Owner claims to be selling due to going on to bigger project hotel up about an hour from current location.

Did my own analysis on the project and seems like I can get 13%-20% cash on cash roi, depending on how much I put for down payment. Love to get your opinion on the matter. Thank You.

Alot of it has to do with venturing into the unknown. Also when its money on the line people go into more paralysis. Remember your spending 50k-unlimited, so its not a small sum your holding up into investment. Also the fact that you might not ever see that money and its not like you can get that money back immediately.