All Forum Posts by: Dustin S.

Hi All just wanted to get a second opinion on a short sale Tri-plex I am under contract on.

So the Purchase is $357k its a 2/1 house plus a 1/1 and studio guest house/casita out back 

The 2/1 has been rented out in the past for $1500/m my rental comps show more like $1400

The last tenants were rough on the place and it needs $6k to $8k in interior work.

The 1/1 is fairly large and is currently rented for $1100/m, comps support it and the tenants seem pretty comfortable and want to stay.

The Studio is pretty small has been rented out in the past for $750/m comps say $700 maybe $750

Termite Report Shows $5k in work I can probably get the work done for about $3k and the outside needs to be painted another $2500. Seller is not gong to do anything.

Insurance is high $2400/ year  taxes $3800/year

Gas$65/m Trash $50/m Water $75/m Septic pumping $340/ year or less Electric $150/m

The electric to me seem very high since there is no A/C and no Major power consuming device. Electric at my primary is from the same company and my bill is typically $25-$35/m with 6 people living in the house.

So for my calculations in the current situation with 10% for maintenance 15% Vacancy and 5% for property management. I show a tiny bit of cash flow and think I will most likely have less vacancy. I think I can reduce the electric by replacing incandesant bulbs with LED and upgrading the refrigerators to more energy efficient ones. Also will look into getting the two buildings separately metered for Gas and Electric. My realtor also does property management and will manage for free the 1st year then 5% after that. As far as value I think I have some good upside potential. The area appreciates pretty well and is 10min to the beach. Currently just a 2/1 house on the same size lot in the area would sell for $300k.

Am I taking everything into account should I go for this even though the cash flow is very skinny?

Thanks 

Can you peak through the windows? Can you get you get the owners permission to go in? You need to get some idea. You may want to talk to the bank see if they would be willing to short sale the property.

A couple of options

Whole Sale the Property (there might no be a big enough spread if there is a lot of work)

Bird Dog for a fee (maybe $500)

You may be able to take the property subject to the existing loan

Or assume the current loan.

On the subject to make sure the loan that is in place is decent you will end up making the payments. Even though your credit is shot FHA has a some program that may allow you to refi after 6-12 on time payments I believe it is the FHA 1023 Program

@Preston Moody II I would still check to make sure there are at least 2 or 3 management companies that would take it on you never know what could happen you could have to move or something and it should still cash flow with management self managing should be an extra bonus. Also I find professional managers are worth every penny you pay them a lot of the properties I have been looking at lately are properties that were managed by the owners and have been horribly mismanaged for years.

What is the property worth current condition and after repair about how much in repairs?

First I would say lets see the other numbers are you factoring in Maintenance property management taxes and insurance?

From what I see I would think it is not a good deal HOA seems pretty high. My other concerns would be.

Can you get someone to manage it a lot of Property Mangers don't like condos or low rents.

Will some one do a loan for $22K What are the misc loan fees going to be? Where I live most lenders don't want do loans less than $100k

I recently evaluated a Student housing syndication what killed it for me wasn't the property, the property was great but it was how the syndication dispersed payments. It was setup with an 8% preferred return to the investor which was good but the syndication was raising over $500k the sponsors were putting in $0 also the sponsors received a 4% finders fee on the closing 7 to 3 split once the investors got their 8% a fairly conservative 5 year model showed the investors return to be $260k the sponsors were to receive $200k almost half of that up front in the finders fee as long as the numbers were still good i would much prefer the sponsors get a bigger chunk of the cash flow and no finders fee. I like to align my interest with that of who ever is going to be running the property. With residential properties I always pay property managers with a percentage of the collected rent.

@Steve Kachniewicz Nothing is set in stone the current co op will not use their members money to extend the sewer line. I am assuming/hoping that the county or state will end up fronting the money to extend the line maybe do a bond or special tax assessment to recoup the money spent.

I still would like to find someone who has dealt with an issue like this

bump

I would agree with everything @Account Closed has said but in addition I would assess your resources. Of the following what do you have Time, Money/Credit, Knowledge. Lots of time and no problem getting turned down may lead you to wholesaling, Lets say your a Veteran and could use the VA loan but don't have any money you could house hack a multifamily or if you have some knowledge as far as construction and remodeling is concerned Fix and Flips may be the best way to go.

Good Luck

Hi all I am new to septic systems and am looking at a multi family property currently on septic but fairly close to a CO OP like sewer line. The septic system has been replaced in the last 2 years and pumped and certified 6 months ago. I still intend to get my own inspection and certification. Either way I don't have any major concerns about the septic itself. However the property is located close an impacted water body and over the course of the next 2 to 3 years there is a study being conducted to determine if the septic systems in my area are contributing to the pollution of the river. I am planning for the worst case scenario and that the county/state will require all the homes about 30 in my area to connect to sewer. Talking with the CO OP like sewer company they estimate the cost to construct the new line would be about $300k then each home have to pay an annexation fee and cost to actually probably $20k-$30k. I have talked to the county and them seem to think that if connections to the sewer become mandated it will be 8 to 10 years down the line before everyone is required to connect. I am trying to find historical examples of how all of this gets paid for but have come up short also no one from the county can say anything for sure. I wanted to know if any one out there has had similar issues and how it ended getting worked out?