All Forum Posts by: Doug Thompson

@Haakon Hansen, 

I bet @Elyse Corcoran could give you a better idea  than I could of the estimated utility costs per month that you were asking about.

https://www.biggerpockets.com/forums/12/topics/303...

Hello @Haakon Hansen

welcome aboard the BP train!   

What kind of square footages, ages of the houses, and types of heat will be helpful for estimating.   Water rates vary by city too.  It will really be a guess, tho.  Gas or electric stove?  Dryer?

Thanks for your thoughts Mindy.   All the digging I've done indicates the factory will be there for a long time.  Anything can change, and I'm aware of that risk, but I feel confident.  They have very deep roots here, and seem committed to this region going forward.   

I feel the cash flow will make the commercial appraisal, but there was a comparable sale of an 8-plex in 2014 for $195k but without garages, which was a great deal for someone.   I've been told that it was more of a buyers market at that time, but I don't know.   

I'm reaching out to a local realtor for an opinion.   I'll see what he thinks.   If the number doesn't make it, we'll just have to start again.

Jason,

it is a small town, pop under 5000.  The factory employs 2500.  There is nowhere near enough housing.  5% vacancy should cover me, unless I cannot get renovations done between tenants.   Also, the repair budget takes care of immediate cap expenditures, but I agree, I'm probably light there for the future.  

@Beau Ryan thanks for your input.  This is a big red flag, especially the shock after thinking the comps were for a single bldg.  It isn't a deal killer, but certainly has given me pause.  The unit has a boiler system, so heat is on me, plus water and sewer.  Electric is the tenants.  I feel that I need to look closer to the expenses, but I'm not totally out of line with my est.

@Patrick L. there won't be much room for improvement on the expenses, unless I keep the management myself.  Not impossible, but wanted to plan for having it managed.   As for the town and the factory, the company is old but very stable.  They have opened facilities in other parts of the region and also near the west coast.   I just cannot see this changing for a generation, altho they are now a publicly traded company, and anything can happen.  Still, roots run deep.  That is the first thing I considered.  They pull employees from 30 miles away.

@David Moore I haven't found any multifamily with a cap rate north of 8 in the twin cities, but maybe I'm not looking well enough.   I think duplex/triplex would offer something closer.

Mark and Joshua, I won't order an appraisal, but will look into getting a realtor to give me a competitive market analysis, like a BPO.  With it in hand, I think I am more likely to get a successful renegotiation.

Hello BP, I'm a new investor. I have been studying, reading, networking and building my education. I plan to flip, as well as long term SFR and MF. I have cash from recent sale of my last startup company. I've been working to make my first deal this spring, and hopefully a few more this year.

So, I found a seller of an 8-plex in a group of 4, this being the worst of them.  It is in a small town, with a huge factory, so there is extremely high demand for rentals, which will continue according to the city.  The current owner is considered unfavorable by most that I have spoken with at the city level.   Not a well run building, some issues with water, but nothing dastardly.

Here is the deal on the table, that I said I would do. No paperwork yet signed, but we were targeting a close date of June 1.  I'm using a local attorney for the purchase agreement.   He happens to be the city attorney.

8x 2BR, one building, built in 1971.  8x single car garage detached

rents at $650 ea, (in line, according to chamber of commerce)

Annual income $66000, includes extra fees for pets and cleaning fees, some laundry.

Expenses $42,639

Net Cash Flow $23,361

Purchase at $295,000

Down payment $73,750, Closing costs $4,000

Repair costs of $18,250, with another $5k needed in few years.

Using the BP rental analysis tool, I have accounted for monthly vacancy 5% ($275), Repairs and Capex $165, Misc $150, Management $432, Insurance $100, utils $614, taxes $404, P&I $1414. The local bank said if the building appraisal at $295k, they would finance 75% at 4.5% and 20 years.

So, Cash on Cash ROI at 24.33%, Purchase Cap Rate at $13.67%.

In my investigation, I noted from the county that the building next door changed hands 2 years ago, at $386k.   It is in much nicer condition, seems very well run.   The building next to that sold at the same time in the same deal.   HOWEVER, further digging shows that $386k bought BOTH buildings, so $193k each.   Whoa, good catch.

I have an attorney locally.  He feels the market was more of a buyers market at that time, and the sellers were ready to move.  However, the market probably hasn't moved that far.   My building has garages, the others don't, which is worth something. Not as well run tho.

My questions are;

1. By cap rate, I couldn't buy anything close to this here in the Twin Cities, Minnesota.  Cash flow wise, it still makes sense to me.  Am I mistaken?
2. My local attorney feels that this won't appraise at the value I need for the bank.  I'm unclear if commercial appraisal would look at Cap Rate, or comps, or probably both?  Any insight here is helpful.  I could pay all cash, but then lose opportunity for many more deals.

I don't feel I'm overestimating rent income, after talking with chamber. Possibly underestimating repair and operations, which would bring down CoC and Cap Rate.

My mind is telling me that I need to renegotiate the price, although have heard the seller say he has 2 or 3 other buyers interested.   I don't want to overpay, but $250 / door cash flow doesn't seem out of line.   

I owe the buyer a response of some form this week.

I'm out nothing other than the $1500 I have into the evaluation (structural eval, atty).

Feedback from any experienced investors is greatly appreciated!

Last week's Podcast #169 has a section that does a really good job explaining how notes can work, and the possible pitfalls.  David Greene also has a website, but I haven't checked it out yet.  Notes is definitely an area I want to explore further.    169 also refers to the Jeff Brown the Bawld guy, and also another guy, but I don't see him mentioned in the notes.

https://www.biggerpockets.com/renewsblog/2016/04/0...

Hit me up by PM if you want to connect and look into this  together.

Let's kick off this forum with a starter thread here in St. Paul.   It doesn't seem right we don't have anything going here!

I'm a newer investor in Roseville, but St. Paul has a lot of opportunities.   I looked yesterday at a 4-plex on West 7th St, but it wasn't really appealing to my eye and strategy.  

If there are any flip/remodel folks that want to help educate me, I can provide some or all of the funding in a joint venture. My goal for this year is to be involved in at least one buy and hold multi-family, and 2 or more flips as JV.

In Roseville, I just stopped by a house that had been auctioned, and met a young family that bought it to flip.  To their disappointment, the house was on a slab, so no basement, no ability to build upwards...   I was stunned too.

I agree on this with @Steve S., but not certain about the LLC. As always, check with your accountant.

I think that even if you lose $5k in FAFSA aid, but make money (like 4 x $5k ea on 4 properties) you are ahead.   It is absolutely OK to make money, and lose the aid.

Managing your future to save $5k in aid seems short sighted.

Hello Kyle, and congrats. I'm fairly new to BP and REI, and I'm also in MN.

The consensus I've seen is buying the prop in your name is fine, but many many recommend creating an LLC, and hold the property there to avoid liabilities. I wouldn't stress too much yet, but get the property done first.

For sure, open a separate bank account.  Keep the monies separate, and you could really just keep track of income and expenses in a spreadsheet at this time.  

Remember my advise is from a newbie!

Congrats on the first deal, hopefully many more to follow.