All Forum Posts by: Max Drizin

Looking back, you are completely right. I reread what I was talking about and I looked after the loan, not the NOI. My mistake.

It's funny that you came across this unit, assuming you meant GWU and not some other private institution. I was visiting a friend who goes their recently, and we were looking at apartments for her to rent next year.

To me, this unit would be worth maybe $45-50k, but definitely not more. Students are also not the best tenants, even if they do pay on time, every time. They always want to sign nine-months, you'll never keep them more than a year, noise complaints are common, and they whine about every little thing. The same coeds who have mommy and daddy co-sign and act on a guarantee form are the same people who call you about a scratch in the paint and a nail hole in the wall.

If Jon's numbers are right (and I'm sure they are, he knows what he's talking about), you've got a 7-cap on your hands. It's not the best deal around, there are probably better ones and in better areas. For me, you'd have to drop the price at least $100,000 or so to make it viable.

Depending on your credit and the kind of financing you get, you might be able to secure 6-6.5% and 20-25% down, on 30 years.

The real issue is that it's a rough neighborhood. You should always go to the property itself and find out, there are a lot of places that are block-by-block. You can be in one area and it's great, but you can look down the hill and it's very rough.

Plus, your management fees are higher, your vacancy is higher, your repairs are higher, there's more time between tenants, and so on. It's better if you can get Section 8, since you can at least get guaranteed rent that way. If it isn't, you've got the worst of both worlds.

I always say that I would never buy a property if I wouldn't feel comfortable going to it at any time of the day or night.

Joel definitely has an interesting side of it that I didn't think about. Personally, I'm a cash flow person and I never really think about land use and whatnot, unless it directly affects my three-to-five year plan.

Long Island is definitely somewhere where land use patterns could change, and it's great to look at alternative use patterns. For instance, the only time I've ever worried about an alternative use is when a coffee company (not Starbucks, better) decided they were going to tear down an old bank building and build a 30,000sqft coffee emporium, basically.

I've always noticed that a coffee shop makes an area better, increases appreciation, gets better tenants around, and so on. So, I've been looking to buy around that area, and I've been lucky enough to have a guy who has expressed a lot of interest in selling a good amount of units at the same intersection as the new coffee shop.

There are so many variables that can play into appreciation and land use that if you do your work, you might find that next year, the city plans on expanding that road and will pay a good premium for your land.

On the other hand, unfortunately, there are always times when land use around you can bring down your property values. Make sure to stay away from projects that could bring down value of the property.

No, simply because it opens you to a host of new problems. People will call the management complaining of internet issues, of slow internet, of people hogging bandwidth, and all this other stuff.

I'd say it would be better to simply tell people that their apartments are internet-ready if they call the cable company or the DSL company. Not enough places offer internet to make it a standard, and you usually won't get that many more renters, unless you are in a college area.

If you are in a college town, things might be different. Tenants, as students, need internet the day that they move in and are used to being continuously connected, since most campuses blanket WiFi these days. That definitely changes the game, but you can always charge more.

It's the same as the all utilities paid thread from a few days ago, tenants only see the additional cost in the rent and they don't want to pay more. Paying 600 for rent and then 30 a month for internet is somehow better than 625 a month, internet included.

I've never had an issue, but I've always gotten lucky. I actually had a seller go through his rent roll with me and tell me, "You can raise the rent on this guy, this guy, and this guy, they aren't going anywhere no matter what you do. You'll make a lot of money on this one right here."

It was one of the most interesting deals I've ever done. In most other cases, I just try to explain that both people are coming out ahead. The difference is that the seller wants cash in hand and the buyer wants a deferred payment. I'm making more money in the end because I can afford to not have it now.

On the other hand, the investor who got in over his head on 6 other mortgages needs cash now, and I've got it. That's the good deal for him. I try to explain everything as a win-win, and that both of us are doing well in the end.

There's no guilt in making money. You made a good deal, provided for yourself, and continued putting food on the table. No one should ever fault you for that.

That's the business we are in. Maybe the person who you sold it to got a bad deal, maybe it was worth less than you sold it for. They just didn't do their diligence, and they got punished for it. Not your fault at all.

I love the atmosphere, personally. I work twelve hours a day (depending on what you call work, I'm considering this part of it), 7 days a week. Between starting a residential brokerage, my own investing, and the accounting/managing/payments side of management for about 100 units, I never have a dull moment.

That's what I think sets apart the success stories from the average people and the failures. The success stories are the ones busting their butts every day, making phone calls, setting meetings, and generally getting things done. The failures are the people that say "I'll call them later" and then never do.

I consider myself successful, and it's not because I think I'm good at the business. I think I can just work hard enough to do better than anyone else. I can research more, find better deals, work with better agents, and attract more investors. I surround myself with people that are always in a hurry, and I love it.

I'm just kind of crazy though.

With the cap rate that low, it's just hard to come by a good way to work on the deal. If you push higher rents, you'll get higher vacancy, which drives your income back down.

At the same time, if you are buying all three properties, you should be getting it cheaper than buying them separately. If you could drop the price significantly, by 35-50k, this might be better. On the other hand, you might be able to get yourself some better terms.

All in all, this deal doesn't seem that good, where it is now. I'm not sure what you mean by auditor exactly, whether you are talking appraisal or assessment. If it's a tax auditor, the numbers are completely worthless. Those people have no idea what they are doing besides trying to get the government as much money as possible.

If those are appraisal values, done by a fair and unbiased source in current market conditions with good comps, then I would be a bit more safe with the numbers. Are the prices in your area comparable to these, higher, or lower?

Sites like zillow and trulia can be helpful, even though they are often wrong. I wouldn't place any stock in their "zestimates" and whatnot but they do have good data aggregation, and it's a good place to get an understanding of an area or a property.

It could be. That's also probably assuming no vacancy. You add in 5-10% vacancy, whatever it may be for an RV/Trailer park, that could get expensive. Even so, an 18-cap deal is a good deal, and I would pursue more detailed expenditures and rent (parking?) rolls from the current owner.