All Forum Posts by: Eric Y.

*bump*  I'm interested in an answer to this too!  I have some investors who might be able to use this.

Just another vote for Dave Rossa.  He's helping me find my next property right now.  Also, I haven't used @Michael Pease yet but have spoken with him and he seems like a good choice.  I'll certainly consider giving him my business when I get to that point.  (1 property is kind of hard to justify using him just yet.)

At least one reason is because sometimes tenants don't pay and the landlord will get stuck with it anyway.  In my city they leave the water in the landlords name for just that purpose and they won't usually turn it off.  If the tenant doesn't pay AND you don't pay they'll place a lien on YOUR property.  (I don't have MF yet but I believe the reasoning is the same).

Now in my rental my tenant does pay but I also get a copy of all bills and notifications sent directly to me too so that I can keep an eye on things.

@Dennis Weber: What would you consider a good downpayment?  10%?  20%? more? or are you looking for some raw dollar amount to cover the costs of foreclosure?

Assuming you want use the equity to buy another property ask around at small local banks to see if they will cross-collateralize. My bank will use equity on my one property as down payment on another, keeping track of it in a spreadsheet with no closing costs and no interest.

@Chris T.  Thank you for the redirect.  Not trying to start a flame war here.  Somehow I missed the 11 pages of that discussion.  I'll dig in.

@Jason Meyers:  Like Angela above, I'd like to hear whether this is working.  I see lots of discussion around it but never a spreadsheet that shows details for comparison.  Did you ever find one?

When I put it in my own spreadsheets I didn't get much for savings, especially when comparing it to the complexity of moving everything around and the risk of going in to more debt.

Thanks for the answers guys:

@Jason Hirko: Agreed that the owner and I may never agree.  It was more a question of why the widely disparate valuations.

@Kevin Vandenboss: The current income is basically $660/mo as they only have 2 apartments rented. (Widow has been letting it go downhill). This type of property is relatively rare in the area in that current owners are sitting on theirs so there aren't many on the market. The seller has refused owner financing though they are in a position to do so. I don't know whether the other offers are written, just going by what my agent is telling me (he is the listing agent as well). I think the COCR, DSCR and 50% rule would end up at an OK point but I was worried about resale. That is, when I get done with it in 5-10 years and want to sell it, the next investor will be using similar cap-rate based numbers for their offers.

@David Dachtera: Thank you for the confirmation on valuing of 5+ units on NOI/cap rates alone. That is what I thought but I see others trying to buy the place even though it may not work out for them. I do think they're in the low 100s so maybe they have lower estimates for repairs or don't care about things like the fuse boxes in the basement. Maybe they don't worry as much about resale.

I appreciate your time and any other time you can give too.

*bump* just once since I posted so late last night. 

Any advice?  Do you need more info?

Hi, as I'm starting to look at MFH I'm trying to understand how to properly value a property. I know about the 'cap rate' calculation but when I talk to my agent, he's giving me different numbers for value. He has experience with many SFH and has been a realtor for 20 some years so I feel like perhaps I'm missing something. In addition, when I presented my numbers to him he said that others had already submitted higher bids. If it had been a difference of 10k, I would just figure that was realtor hopefulness vs cold hard numbers but we had a much larger difference.

I have reviewed the numbers I'm putting into my calc with several local investors and they all agree that the numbers are close to reality (though I am a bit more conservative than others when it comes to saving for repairs/capex)

Property stats:

• 6 plex, 4 1 beds, 2 efficiencies.  
• The property is in OK condition. It could use new electrical (~$20k), a patch to the parking lot (~$4k), new bathrooms ($12k), updated kitchens ($5k) (Total: $33k)
• Listed at: $150k ($25k/door)
• Estimated NOI: $11,466 (based on "max" rents that I could get after repairs listed above)
• Local cap rates: 7-9%, this is probably a 9% property (according to my banker who also owns MFHs)

Cap rate calc: 

• $11,466/9% = $127,400.  However, since that is after repairs and since I wanted some equity I thought I'd offer $85k.

According to the realtor:

He looked at some databases that he has access to and estimated the value of the property at $200k - $225k after repairs and getting the units rented up.

So, I have an experienced realtor and an experienced banker telling me 2 different things.  The people who are bidding are offering much higher than what I am offering.  Obviously you can make money on this property but my hope was that I would also get some equity after fix up.  Am I missing something or am I bidding against people who have different goals?  Maybe they aren't going to fix it?  Maybe they'll make no money for a few years and use the income to fix it up?

Thank you for any help you can give as I start the MFH journey.