All Forum Posts by: Jack Ropp

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Lansing.

Purchase price: $86,000
Cash invested: $6,000

Up and down duplex - 2/1 & 2/1 - 1800 sq ft. (800 top) (1000 bottom)
$700 Top $800 Bottom - $1,500 Gross Profit

$767 PITI
$250 Avg. Utilities (pd by landlord)
10% Capex (1,500 x .10) = $150
7% Vacancy (1,500 x .07) = $105
Total = $1,272

$1,500 - $1,272 = $228 cash flow.
These were the numbers I ran before purchasing the property. Slim margins with the plan to slowly increase rent as I am below the market average in my specific area.

This has been a tremendous learning experience as this is the first investment I have ever purchased. I want to continue to invest with my next goal to partner with someone and purchase a small commercial property. Ideally something between 5 - 24 units.

What made you interested in investing in this type of deal?

The surrounding area and BRRRR strategy.

How did you find this deal and how did you negotiate it?

MLS negotiated down 6K.

How did you finance this deal?

Conventional Loan

How did you add value to the deal?

Sweat equity convincing friends to come help do general repairs and landscaping.

What was the outcome?

Still, own the property.

Lessons learned? Challenges?

Really get your numbers straight and have a solid plan going in.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, I work with a realtor.

@Brian Adams  

Nevermind I just realized you are just coming up with a viable offer based on desired CAP Rate. Haha my bad.

@Brian Adams

I have recently put an offer in on 12 Units. 3 quads. What kind of valuation are you receiving by dividing your NOI by Cap Rate, and what numbers are you ideally looking for?

Does anyone have experince using a RUBS (Ratio Utility Billing System)? And if it is worth it.

It was an old single family, that was converted into an up and down unit. Heating is gas. 

I am closing on my first investment here shortly that will be a duplex. I will live in one unit and rent the other out. All utilities are covered by the current landlord, but I don't want to deal with that headache. 

Does it make sense to sub-meter the property and divide utilities, because I do not want to have all utilities in my name, now and in the future when both units are occupied by tenants? Wondering if anyone has experience with this, and I know every state is different. I am living in the Lansing, MI area.  

First off once again the wealth of knowledge, experience, and information that I have received on my first post is absolutely incredible. The amount of support on here continues to blow me away. 

I would love to pick up some part-time weekend work with some local investors around the Lansing area, I'm willing to help any way I can. Please feel free to message me if you are in the area and need some help in any way.

That being said I always try to find the most logical way to analyze a situation no matter what that situation is. I think the most logical thing for me to do is work as much as I possibly can and continue to save, pay off loans, and learn. 

My goal in one year is not to have my student loans paid off but to have $25,000 in savings and a credit score above 680. I will continue to pay off loans but at a 3.25% interest rate, I believe that it makes more sense to save to invest before paying off the entirety of the loan. 

The best course of action for me I think would be to invest in a multi-family, rent out and live in the other unit. 

Thanks again for all the help, and advice! 

First of all, thank you to everybody who has provided input, the wealth of knowledge on here continues to shock me!  

@Nathan Gesner I am going to check that book out as I have heard a few others mention that book as well and completely understand your point of view. I think it would be irresponsible to not have some money set aside to handle repairs etc. 

Looking at it the most logical way would be to continue to pay off student loans but setting aside some money for a down payment on a loan and reserves for repairs so I can invest as soon as possible with a safety net.

I appreciate it, I haven't talked to any lenders which I plan to do here soon, is it going to be tough to find a fair loan with no assets and a mediocre credit score?

I am 23, just graduated from business school, I worked and played baseball so I only have about $8,000 in student debt. I am currently working a job making around 40K a year and am renting a place with some roommates. 

I am eager to get started but am hesitating because I kind of want to be debt free going into my first investment. I have no assets besides my car that is paid off. I have a 645 credit score so I guess I'm just wondering if I should wait or just go for it. 

I don't know if it makes sense to incur more debt or work on being debt free and try to establish a better credit score. 

I am looking at the East Lansing (MSU) and Lansing market because that is where I currently work and live.

Thanks for any help in advance.