All Forum Posts by: Ed Matson

Last February we paid $700 for an appraisal on a three family for a refi.  Home has been a legal three family for many years in a market with many other similar buildings - New Haven, CT. That being said a "complexity factor" of  86% sure seems high to me. I'd get another quote.

I have had very good luck with vinyl plank in unit interiors.  I would imagine the extra service life would justify the cost increase over carpet.  Plus better looking, more modern, easy to clean, waterproof.  I love this material and it looks great.

My experience has taught me that it is extremely difficult to time the market.  If the deal meets your criteria today, do it.  If not, keep looking.  The value of the same deal in two years is an unknown despite what the pundits say. 

I think the BP podcasts and webinars are great free educational tools.  You might wasn't to start there.  Also, if your end goal is owning apartment complexes, maybe it makes sense to work for a property management company to learn the business.

Regarding painting kitchen cabinets. Respectfully disagree with @Marc Winter. I painted old dark, but sound lower end 1980's cabinets white and put brushed nickel hardware on. Looks great a year later. Follow instructions given on youtube exactly. Clean with TSP, prime and paint with high quality oil based products and use a foam roller. Looks clean and modern.

@Kelly Iannone, I should have said "complexes" not "HOA's" in my comment, as my reasons go further than HOA issues. I have yet to find a HOA that requires tenant approval, but of course there can be rental caps/limits. Additionally I like to evaluate the financial health, capital reserves, and property condition of the association to try to understand whether a large assessment is looming. I also look at deferred maintenance and common charge delinquencies as an indicator of how the complex is managed. The biggest factor is not directly related to the HOA but other market factors. It seems that in my area the ratio of purchase price/rent can vary significantly fro complex to complex, sometimes for reasons I don't understand. As one example, a complex I invest in (B-) has an average acquisition cost of $85K/unit and rents for $1200/month. Just up the street is another, somewhat nicer (B) complex where the acquisition cost is about $125K/unit but the average rent is only $1300. Same neighborhood.

I have five townhome condos in addition to a triplex and a larger MF. I am finding the townhomes to be providing very good C on C returns with the least work.  And, a better caliber tenant. More similar to single family homes. However, it is difficult to find townhomes where the numbers work.  So, acquisition is more difficult.  And, you do lose control of some of your expenses.  But, I like having all of the exterior maintenance taken care of. You do need to do due diligence on the association very carefully.  I have a short list of associations in which I will invest and a longer list of those where I won't.

A 16 unit MF will not be eligible for a 30 year fixed rate loan.  You will most likely see 5 and 10 year term loans with 25 or 30 year amortization schedules.  If you are lucky you  might get a 15 year term loan.  Properties of 5 units and higher are eligible for commercial loans such as these.  Those sweet 30 year fixed rate loans are only for 4 units and less.  You may be well served by seeking out a commercial loan broker. 

Sorry about the water/sewer. Totally my mistake. Also, I was unaware you were planning on three months’ of rehab and vacancy. Three months is a long time to do 10k of work.

@Dakota Hicks - You increased the PM but did not change the water/sewer to a monthly expense, thus inflating your expenses/reducing your NOI. I do not factor in PM for my CT properties for reasons very specific to my situation. As a general rule I think you should use them in your NOI calculations, especially if you think you will ever scale to the point where it is necessary. Also, your holding costs are essentially a reserve for operating expenses. This should not be subtracted from your offer because over time they are already included in your operating expenses. Closing costs should be capitalized. You are using $10K for repairs. Why? If the property requires less then you are only making your offer weaker. Have you inspected the property? My max purchase price requires a 9 CAP also due to my specific situation. Because of this it is harder for me to acquire properties in CT than others who are satisfied with a lower return. I am all about cash flow and don't pay any attention to potential for appreciation unless its an active value add purchase where I am doing a substantial rehab. Also, is a 12 CAP appropriate for your market and this class of property? If so, use. If I used a 12 CAP my offers would never be accepted.