All Forum Posts by: Derek Gibbs

So we reached a number that works for both of us. However, the seller won't provide copies of the current leases or any financial info like tax returns, income statements, etc.

He sent a typed document that listed all current expenses and the rent for each unit but just his word and no official docs.

He keeps stating that he wants to sell "As Is" and doesn't want a lot of hassle. I told him anyone in their right mind is going to ask for an actual rent roll and proof of income.

Maybe this deal is dead and I should wish him luck. No way the bank is going to finance without this info.

@Max Miller

Dumb luck really. I mentioned to my attorney that I was interested in buying an apartment building. Her husband, also an attorney, overheard and mentioned his client who was looking to retire and unload the property.

@Jay Helms Exactly right. We are using their nubers and not pro forma. 

@Joshua B. For sure!

@Jeff Kehl We've been working on getting quotes for the services and confirming costs. So far, their numbers are pretty spot on. The taxes and insurance will go up though.  

I really like your idea about the rent. I can see doing two at a time and think that makes great sense.

@Max Miller The rents are way below market. There are no real amenities but we have plans to add some after closing.

@David Wright Just going off of the quotes I've gotten from a few banks I called. 

15-20 yr AM around 6.5%. Of course everything is negotiable so I hope to do a little better.

Taxes are very high and there is a neighbor property that is very similar with much lower taxes and assessed value according to the city. I plan to appeal for lower taxes after the purchase but will use the current numbers for my analysis.

@Stephen Swiatek All numbers were given from the owner. I did call and confirm the utilities trash and taxes. Expenses plus mortgage = negative cash flow at asking price. Typical cap rates for the area are just a guess based on a few recent sales in the area. 

All current residents are month to month. There have been no vacancies in several years and I don' t want to empty the place out by raising the rent $200+ right off the bat. It seems like a bad way to start our relationship. I realize its a business but, it's not just about the money.

Thanks for all the advice from every one!

I found a very nice C class building with 10 units near me that seems like a great deal on the surface. If you use the 50% rule, the numbers are great. However, I have a list of expenses from the owner that total 65%. At that number, it's not really a deal. I would have to put a lot more down and low ball the owner to make it work. From what I've read here the 50% rule is almost matter of fact. Should I count on 50%? The rents are $200-$250 below market but you can't raise them to market rates all at once. My plan is $50/yr. 

Below is the analysis at the lowball offer. They are asking $335k.  Thanks for any help you can offer.

@William Nance Did you find what you were looking for?

I'm in a similar situation and looking for a Fiduciary advisor that is fee only.

@Curtis Rouse Jr Thanks for the advice! All of the current residents are month to month so I would ask them to sign a new lease upon purchase. I just don't want them all to run away if I ask for a big increase. I like your idea of $50/year. I might start with $100 the first year due to the big gap from market and then $50 from there. Have a great day!

I'm about to write my first purchase offer and have a question.

If the current rents are $200-$300 below market, how much is too much to raise the rents upon purchase? $100?

Thanks for the advice.

Recourse means you are personally guaranteeing the loan. 

Basically, it means the lender can come after you if you default including any amount not covered by the property forfeiture. 

@Shaun C. I live near that house and can't believe it's the same place! What an amazing transformation indeed. You and your father are very talented and the house suits the neighborhood well. Do you do residential design work? I put an offer in on a house with a very strange layout and if it gets accepted, I might need some ideas.

Good Luck with the sale!