All Forum Posts by: Rick L.

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I need to better familiarize myself with CoC return yields and CAP rates for my area to analyze this deal. Does anyone have any suggestions how to become more familiar with these two in my market?

Property Description: non-MLS four family property was originally a 7 unit building (approximately 4400 sq ft total between both floors.) that was converted to a 4 unit building. The supposedly owner did a total gut to the building approximately 5 years ago. It has new windows, A.C., electric panels, roof, plumbing, and sewer laterals. Two units have 3 bed/1.5 baths; the other units are 3 beds/1bath. Property is located ijn a C-rated neighborhood.

Asking Price: $145,000

Conventional Loan Terms: 30yr @ 4.75% w/ 25% down payment $575

Gross Rent: 2300/month; 27600/yearly

Seller Disclosed Expenses (Unconfirmed):

Taxes: 1352 yearly

Insurance: 1600 yearly

H20 & Sewer: 528 yearly

Expenses:

Using the 50% rule, or 60% for expenses rule since owner would be responsible for utilities (sewer & water):

2300x 60% = 1380 for expense other than Principle & Interest (P&I)

Vacancy @10% = 230

PM @ 10% = 230

Repairs/Improvements@13% = 300

Insurance = 134 (seller disclosed) VS. 160 (estimated)

Taxes = 113 (seller disclosed) VS 125 (estimated)

Sewer & H20 = 132 (seller disclosed VS 210 (estimated)

$1380 - 1255 (My Estimated Expense Total) = $125

P&I Payment and Profit:

2300(Gross Monthly Rent) x 40% = $920

P&I = 575

$100/Door Rule x 4(Fourplex) = $400

$920 - $975 = ( -$55)/month

As you may notice, the seller's disclosed expenses vary greatly from my estimated expenses. Therefore property expenses may very well be 55% instead of the above calculated 60%.

With this change or 45% left for P&I and $100/door.

2300(Gross Monthly Rent) x 45%= $1035

P&I = 575

$100/Door Rule x 4(Fourplex) = $400

$1035 - 975= +$60/month

I have overestimated most of the expense numbers aggressively to skew the expenses in my favor. Most expenses will run less than my estimates. So, with the fudged numbers and percent allocated for expense the numbers work out and the property cashflows with the proposed loan terms.

I would welcomed a more seasoned veterans opinion on my numbers. I'm concerned that I'm being way to aggressive with my numbers and I have way more "meat on the bone" so to speak than what I've actually calculated.

Welcome Chris. I was born and raised in the QCA, but currently live in St. Louis.

Just wanted to update everyone. So, much like those who have had similar experiences have said. I was unable to overturn the low appraiser's appraisal. However, I did reach out to several bankers via a local REI club. Several of the bankers were more than willing to accpet the good appraisal and proceed with the HELOC. I'm happy to report that I will closing on the HELOC loan by the end of the month.

@Randy Duncan Welcome to BP! Thanks for the suggestions! What are the toilets you have used and would recommend?

What is Advantek? A google search didn't turn up anything useful.

What does the UPS/FedEx box cost? I like the idea of having access to it after 5pm since most of their stores are open late and on weekends too.

Thanks for all the suggestions. I'm working on builiding my case for the better comps. I realize I'm fighting an uphill battle, but I might as well try.

Thanks for your response @Steve L. The 548k appraisal was performed 9/15/13. The 450k appraisal was performed 10/14/13.

The appraiser used one of the same comps.

In August I attempted to refinance my mortgage on my fourplex and as a result had to get an appraisal performed. The appraiser came took measurements of the building, verified sq. footage, took pictures, and inspected each unit and the property carefully. In total spending around 45min- 1 hour around the property. The appraisal cam in at 548k.

I just had another appraisal performed, this time in an attempt to attain a HELOC loan. The appraiser briefly inspected each unit. Took a few pictures and was finished with the appraisal in about 10min. I thanked him for coming out and handed him the appraisal that was performed in August for 548k. His comes in today at 450k.

Sorry for the novel, but I wanted to reach out to the forum and see what my options were. I would obviously like to dispute the appraisal and the comps he used. I obviously prefer if he used the comps on the refinance appraisal that led to the 548k price. I'm totally flustered with this guy! What are my options???