All Forum Posts by: Jaysen Medhurst

Laura,

Since this is more than 4 units it is considered "commercial," which means you can't get conventional financing. Typically you would have to put 25-30% down.

Your expenses are way too low. Rule of thumb is 50% of GRI, before financing.

Lots more to look into before pulling the trigger.

Good luck,

Jaysen

Kurt and Andrew,

You can cool/heat several rooms with 1 condenser unit and several wall/ceiling units. They can run independently, which is nice if you're not using the bedroom or the living room gets a lot of solar gain, but the kitchen doesn't.

Are all of these costs supposed to include labor? I don't think you can pay $200 for a toilet installed or pay $500 to put down a tile floor.

$10k for plumbing? What if all the copper has be stolen from this property?

Have you run these numbers by a contractor? Even if he hasn't seen the property, he can give you a sense check?

Why can't you see the property beforehand? Drive on over there. Is it occupied? Now, I would never suggest you trespass or illegally enter a property that you don't own...but I bet you can get a lot of info from the curb. Which reminds me, you don't have anything in the budget for the outside of the house.

Good luck!

HI Chris, weird that the owner under sold by $45k and is willing to do the exact same thing again. Get your own comps to determine a fair sales price. Ask him to see the actual appraisal. It will have the properties used as comps.

1971 is hardly "young age" (trust me, I was born in '74). A 45+ year-old property is going to have CapEx, Maintenance, updating required. This isn't a problem, just go in with your eyes open.

Price actual seems high based on the properties I'm considering in my area: ~$200k price; 4-family; 2bd/1bth; rent $850-1000/unit.

Bechara, if the market is so hot why is the seller willing to take below market price and offer financing at 2nd position. Something smells fishy here. Be very careful you don't buy someone else's problems.

Nicole,

You should expect expenses of at least 50% of Gross Scheduled Rent. Possibly higher, since you have 10 units across 5 properties. Based on $6375/ month in rents, you should figure at least $3188 in expenses. So, after $3k in debt service you're only making $187/month or $18.70/door. That's atrocious and a terrible deal.

You have a lot more analysis and due diligence ahead of you to determine what sale price would actually make this a good deal.

Hi Kurt, I would consider mini-split systems. You don't have to run ductwork (just the refrigeration lines) and most of them can also work as heat pumps on the few days a year when it gets chilly at night.

Hi Kimberly,

You'll obviously want to confirm actual rents and expenses from the current owner. Then confirm any deferred maintenance or necessary CapEx. You have to figure that immediate cash outlay into your analysis.

CapEx and Repair might be high. I usually figure 7% each.

I like to see $150/door cashflow after financing, which you don't have figured in here. Your debt payments are likely to be almost $700 a month ($104k @5% and 20-yr amortization). That brings your cash flow down <$400/month or <$45/door. That's no deal.

Not sure how you got to 14.45% Cap Rate. I got 9.9% ($12,888 NOI / $130k purchase price).

Is there room to raise the rents? On $5067/month scheduled rents, I'd like to see your expenses no higher than $2787 (55%).

From this limited info, I think this is a pass.

Yes, HD sells Roxul (at least in my area - New England).

Good point from Jim Adrian.

John, wish I had seen this yesterday. Hope this isn't too late. 

Check ALL water valves to make sure they are working.

Scope the sewer, if it's an older house. Not really something the inspector does, but worth the money.