All Forum Posts by: Account Closed

I am a beginner investor from upstate NY. It is very hard for me to get anything to cash flow properly without having a large down payment or buying distressed and rehabbing (which is my current focus).

My question is, are you buying under an LLC or your personal name? Reason I ask is because I have yet to find a local lender who will go higher than 15yr term with 20yr amortization at a 6% rate which throws the numbers back into an under-performing deal.

I also agree with @Christian Nachtrieb that vacancy seems a touch low.

Like you, I do the majority of capex upon acquisition.

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Greetings fellow BPers,

I am currently under contract to purchase a 4plex, a single family and a large storage building all on one parcel. The seller now wants to back out of signed contract. I have tried numerous times to conduct home inspections but I have only been able to inspect 2 out of the 5 total units due to seller noncooperation. I have the whole property under contract for 62K and the value of the property is probably close to 90k or better. The current total rental rates for the property (which all units are filled) is a little low at $1900/month.

Can the seller legally back out of this contract with no repercussions? I will be losing approx $30K in equity right of the bat and since it is an investment property i will also be losing income. Using the current total rental rates of $1900/month, over a short 5yr time frame I will be losing approx $57K in income (1900x12= $22,800 per year x 5 years = $114,000, take 50% away for expenses = $57K).

I have informed my attorney that I want to force the sale or be paid $85K to walk away and am awaiting a response from my attorney.

Any insight or information you may have is GREATLY appreciated.

Thank you

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Originally posted by @Jeff Johnson:

Jason,

I pay the water/sewer on a few of my properties and it usually runs around $60 to $65 quarterly. That makes a big difference compared to monthly. Also, my garbage pickup runs around $75.00 quarterly. I invest in the Mohawk Valley just east of Utica, NY. Hope this helps, good luck.

Jeff,

Thank you for the comps on the expenses. Always great to hear some real life figures. I hope mine are close to what yours runs.

Jason

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Originally posted by @David Drew:

Looks like it this should cash flow better than you think. I'd suggest not paying for property management, but still factoring it into the projection. Also, between CapEx, Repairs and Lawn Care, you've got over $3k. That along with the PM costs are your profits. I usually go conservative on the vacancy and call it 1/12 = 8.3%. That's still lower than your 10%. Probably safe to pare that down unless you're sure you're going to have a full month's vacancy in both units. Finally, not sure how you're factoring Depreciation, but combined with all of your Expenses deductions, you're not going to pay any taxes, at least not initially. Using your figures, an 8.3% vacancy rate, including I have you at $138 per door, after taxes. If you can get any of that Cap Ex, Repairs, Garbage, Water etc cost down, those add right to your bottom line. You need to find $62 more per month to get to $100 per door.

David,

Thank you very much for your break down on the numbers and how you would look at things. I understand your point of view and will try to figure a plan to get some of my numbers down. I do not expect a full month vacancy in both units (I certainly hope not anyway). I have not calculated for any depreciation, I just consider that the icing on the cake.

Jason Ruff

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Originally posted by @Gary Kline:

Oxford, being a rather rural area, will bring lower rents. Just don't have the jobs that pay a good amount. Property values are lower there as well. You may want to look at the Binghamton area where rents should be higher and prices very competitive.

Just my thoughts.

Gary

Gary,

Thank you for your insights. You are correct about the property values. I have been looking in the Binghamton area a little bit. I do notice that quite a few of the list prices are better there. I am trying to learn the good areas and bad areas (though I have told there are also areas with good streets and not so good streets?

Jason

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Originally posted by @Michael Wagner:

@Account Closed

If you have the time, it is advisable to self manage your first property....otherwise it is hard to really know "what to pay a property management company to do". Im a big proponent of hiring it out but only after you have mastered the day to day yourself so that you intimately know what is going into the management.

Where is Upstate NY are you?

Michael,

You make a lot of sense in that a person should have intimate knowledge of what a management company does. I am located in Oxford, NY, about an hour east of Binghamton, NY.

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Originally posted by @Len Roche:

Hi @Account Closed,

Unfortunately I don't know if many banks will be willing to loan you money for under $75K. Have you been preaproved for a loan? You may have to pay all cash for this property anyway. If you do find some one, Going to 30 years will improve cash flow. Also 6% interest is really high. I just got one for 4.04% at 25% down.

To save some money:

Try making the utilities your tenants responsibility. That will save you $180/month.

10% Vacancy seems really high. If your area has good rental history I'm sure you can lower this value save more money. Maybe $26 to $65 depending on your re-evaluation. If you are managing this as your sole property than some extra effort and preplanning will keep your vacancy low if the property is in a decent location.

Speaking of management, keep this budgeted even if you don't hire it out. You may need them further down the road. If not you get a get good cash bonus.

Good luck!

Len,

Thank you for your advice/ideas. I have been to a couple lenders and they would only go 20yrs and the rate was an average of 6%. I need to try the smaller banks and credit unions. The 10% vacancy was estimate was also from the banks criterion. I will look into passing the snow,garbage, etc on to the tenants.

Thanks again

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Originally posted by @Robert Riess:

Is this your only property? Are you sold on outsourcing your management? I don't think it's necessary to have management for one property.

Robert,

Thank you for your thoughts. Yes, this will be my first property. I figured on hiring management for 2 reasons. 1.) since this property will be owned by an llc, I would like an additional layer between myself personally and the business end. 2.) I plan to acquire more properties so I would already have that expense worked in to the expenses. On the other hand, I do realize that I could be cash flowing more per year if I did not hire management thus enabling me to purchase more properties sooner.

This is something that I will definitely give a second look.

Thank you

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Originally posted by @Michael Wagner:

Taxes in NY do make it tough! What happens to your numbers if you let the tenants handle there own snow? That will save $30 per month. Garbage seems high too....as does water/sewer....I would expect those to be half of what you show based on my Western NY market. Of course yours could be what you estimate. What kind of shape is the property in? Capex seems high at 10% but better safe than sorry! Do you have someone locally that could verify your numbers?

Michael,

Thank you for your response. For the garbage, water/sewer I have estimated (glad to know they might be lower). The property is in decent shape structurally, I will be putting another layer of shingles over the roof (one layer currently about to end of life span), Exterior needs a fresh coat of paint also. Do not really know anyone to verify numbers.

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EDIT

Repairs: $65/mo is 5% not 10% of rents.

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All Forum Posts by: Account Closed

Account Closed has started 8 posts and replied 32 times.

Post: Thoughts on this deal in upstate New York

Post: Seller Wants To Back Out Of Contract, New York State

Post: WON'T CASH FLOW, is it the taxes?

Post: WON'T CASH FLOW, is it the taxes?

Post: WON'T CASH FLOW, is it the taxes?

Post: WON'T CASH FLOW, is it the taxes?

Post: WON'T CASH FLOW, is it the taxes?

Post: WON'T CASH FLOW, is it the taxes?

Post: WON'T CASH FLOW, is it the taxes?

Post: WON'T CASH FLOW, is it the taxes?