All Forum Posts by: Greg Kasmer

 Kwok - I think your approach is sound. However, in most appraisals I've seen there is more than 2 comparables used, at least 3-4 in my opinion. So, I would suggest using some of the other comps that you have listed and see if you would get a different perspective. Also, one of the biggest factors in looking at comparables is the finishes of the properties. Did you look at photos of the comparables? Did they use granite or quartz countertops, stainless steel appliance, etc... From my perspective the type of finishes between your property (when it's rehabbed) and comparable properties could swing 5-10% if there is a substantial difference in finishes. Good Luck!

Lance - I've have contractors take down popcorn ceilings in a few single family homes that were built in the 1950's, but I haven't had anyone say that they might have contained asbestos. Did someone mention that to you? I would just hire a guy to remove the popcorn ceiling - they might be able to weigh in as well as give you a quote. 

Olu - Did you get a breakdown of the expenses to validate that the expenses would be how YOU would operate the building? They may have higher insurance, maintenance, and/or property costs than you would - or maybe not, but I would double check their expenses if part of your hesitation is around the expense ratio. As for the revenue, I would rely on a property manager to verify/weigh in on the rent amounts. 

As Gino stated, I think the biggest challenge will be financing with negative cashflow. I think the bank would require a greater % down than 25%, unless there was a super solid plan to increase revenue and/or decrease expenses very quickly. I would talk to a few lenders and see what they say. 

I'm also currently looking at a 10 unit that has rents WAY under market ($500-$600/unit/month), but also worried about how the initial financing would look as they are looking to see at a 5 cap based on actuals. 

Cody - Just finished purchasing a four plex myself and in the "Transition Phase" from the previous owner to me. Some things to think about:

1) Estoppal Letters - Yes, definitely. My real estate agent handled that for me and I think it's very good to confirm the rent amount and security deposit. Actually find out through that process that one of the tenants used their security deposit as rent one month. So, I had to get the owner and tenant agree that it actually took place. 

2) Meeting Tenants - I would say not needed, but certainly when their lease is up, you want to re-screen the using your screening criteria for income, background, etc... 

3) Review the leases and understand expirations and lease renewal terms if any. If you  do plan on moving into the quad you should identify what unit you desire - maybe based on the rent amount or the tenant behaviors, etc.. 

I would also:

1) Recommend you schedule the township/borough U&O at least 10 days prior to sale. If their is any issue I would make the current owner remedy the situation and get the township to give you a "clear U&O". You don't want to inherit any issues from the township. 

2) Get a copy of 2-3 months of utility bills for the building.

3) Shop insurance quotes now. I had a WIDE range of quotes for my building, but I ultimately winded up using Hemlane for the quote as they had the best price and coverage. 

Good Luck!

Wai - I would echo comments from others. I recently bought a 4plex and I was told one of the 4 tenants did not always pay on time, so no surprise in my first month there was, you guessed it, one of the tenants did not pay. Therefore, going through the process of evicting him with my property management company. I would suggest you make the request to have the tenants leave, AND, if it delays the transaction that's no skin off your back - just keep you lender/bank in the loop! Good Luck!

J Gerard - Is this a long-term or short-term rental? The rental income of $4,400 looks very high for the overall value ($250k) of the property. If that is the case, that's a very good! However, I would suggest double checking the rental income. Also, I would also suggest incorporating some property management fee into the analysis even if you prefer to do it yourself - at some point you may want to hire someone. Good Luck!

Devin - I would agree with others have said. Itemize up his damages to the unit while you focus on re-renting. Then, once you have a new lease in place with a start date, calculate your lost rent - which will likely wipe out any security deposit funding he/she might get back. Good Luck!

Tim - I think the appraiser may look at the assessor's office information to see the square footage, bedroom count, etc... So, you may want to call the assessor's office and talk to them about your "theoretical scenario" (rehabbing a place to add a bathroom and room, but not adding to square footage) to see if/how they would re-assess. That conversation might guide how you approach the township about permits, but I would agree with Nathan that you'll likely pay some fines in addition to the typically paperwork.  When you talk to the township I would lean heavily with the fact that you assumed no permits would be needed because you weren't changing the square footage and you were doing the work, but I don't think that rationale will ultimately prevail - although it might help reduce the fine. Good Luck!

Shawn - I would suggest you develop a pro forma based on the stabilized state of the property to understand if it cash flows once all units are occupied being sure to include all reasonable revenue assumptions (rents, vacancy factor, etc..) as well as expenses (debt payments, maintenance, utilities, property management, taxes, insurance, turnover costs, etc..) Once you have an idea of the cash flow in the future state you can then spend most of your time determining the funding for renovations to get the property to that point. Good Luck!

Adam - Happy to share what I use to underwrite deals in the 10-50 unit. Just reach out and message me!