All Forum Posts by: Jamie Gruber

My wife and I own a few properties and are looking to renovate one of them. My parents have a home equity line that they are looking to get a return on. If they write my LLC a check for $50k as a loan for renovations, I believe the tax implications for me would be positive in that I can write off the interest paid back to my parents (based on terms we’ve discussed). And for my parents, they’d need to claim the interest I paid them as income. So I’d have to issue a 1099 to them with the amount of interest paid. Am I missing any negative tax possibilities for either of us? I’m mostly concerned about a negative impact for my parents. Any thoughts or advice are appreciated.

Thanks Mike Dymski I wasn’t sure if I should use his cap rate with correct expenses to make the offer and plan to exit after repositioning at market cap rates. But your point is valid. Stick with the fundamentals. Outline the desired return and make an offer that allows me to meet those goals. Are cash on cash and cash flow per unit still relevant metrics to use in the multifamily space or should I be thinking about other measures instead or in addition? My goal is 15% cash on cash and minimum $100 per unit after all expenses (vacancy, maintenance, management, etc) with my current portfolio. Do I need to retune for multi family? Any thoughts are appreciated.

@Alex Deacon.  Thank you for the response.  In terms of turnover, if there is a need to evict 2 tenants and the units need updating, how do I calculate that into the offer. In other words, my offer now would be to say to the owner 'you presented an 11 cap, but when expenses are calculated including maintenance and management, and 11 cap means the property is worth $366k vs. $520k.'  If during due diligence I learn that evictions and turnover expenses will be $40k, how would you go about negotiating the price?  Would you simply offer $40k less?  Or some percentage based on 5-7 years?  Again, thanks for any help you can offer, and the reply! 

I own two duplexes and a single family but am looking at an off market 8 unit and analyzing multi family is a bit new. Any advice would be more than welcome. This is just an initial analysis. I’ve seen the property, talked to the owner and received his rent roll and expenses. Due diligence will come later if I can get this under contract. Asking $520k Indicating $80k in rent and $20k in expenses. Only 25% and the owner pays for all utilities. The property needs some work so expenses seem very low, especially considering utilities. Based on an asking of $520k and $60k NOI, he’s selling at an 11.6% cap rate. The expense itemization is missing some key items: - management - lawn care and snow removal - maintenance costs It only lists taxes insurance and utilities. I’m considering $10k in management (10% of rents plus 25% turnover annually), $2500 annually in lawn care and snow, $5000 annually in maintenance and repairs. This increases expenses to about 46% and decreases NOI to $42500. Based on an 11.6% cap rate, I’m looking at a value of $366k. Again, I would then need to get a sense of actual income, actual expenses, inspection of the property, better idea of rent potential, etc. Is this a fair way to assess a multi family? What else should I consider that I’m not at this point? Thanks!

I own two duplexes and a single family but am looking at an off market 8 unit and analyzing multi family is a bit new. Any advice would be more than welcome. This is just an initial analysis. I’ve seen the property, talked to the owner and received his rent roll and expenses. Due diligence will come later if I can get this under contract. Asking $520k Indicating $80k in rent and $20k in expenses. Only 25% and the owner pays for all utilities. The property needs some work so expenses seem very low, especially considering utilities. Based on an asking of $520k and $60k NOI, he’s selling at an 11.6% cap rate. The expense itemization is missing some key items: - management - lawn care and snow removal - maintenance costs It only lists taxes insurance and utilities. I’m considering $10k in management (10% of rents plus 25% turnover annually), $2500 annually in lawn care and snow, $5000 annually in maintenance and repairs. This increases expenses to about 46% and decreases NOI to $42500. Based on an 11.6% cap rate, I’m looking at a value of $366k. Again, I would then need to get a sense of actual income, actual expenses, inspection of the property, better idea of rent potential, etc. Is this a fair way to assess a multi family? What else should I consider that I’m not at this point? Thanks!

Hi Mike - is this still available? 

I'll be curious about the progress. Thanks for posting.

Thanks Patsy Waldron . Excited and nervous all at the same time! I appreciate the affirmation. It seemed better to go the personal route. I'm not sure I need to form an LLC either way just yet anyway. But I do need to form some sort of entity with this many properties. Time to find a good CPA! Thanks again.

What an amazing thing BP is. Always liked the idea of real estate, but not until I found BP did I appreciate concepts like finding a niche, reserves, what cash flow truly is, etc. My wife and I have decided on small multi family but and hold as where we will focus. We were looking for property when we came across 4 duplexes that need some work and are all owned by the same person. We tried buying one or two but he wanted to sell all 4. Full asking combined was $460k. He lowered to $395k, but my analysis showed $325k to be the price I'd be willing to pay...and he accepted (never thought he would!). So now, I'm under contract on these 4 properties. I've had conversations with banks previously and like a smaller regional bank that will do portfolio lending since I have a schedule E (forced landlord SFR that Ive had to hold onto). I talked to another bank that would do this as commercial. 20% down with a 25% amortization and a 5 year fixed rate period. The benefit would be putting the properties in an LLC. It seems to me going the personal route with the portfolio lender who offers a 30 year amortization with residential mortgages is the way to go. But I wanted to see if my logic is flawed. Apologies if I left out pertinent details. Thanks in advance for your feedback/questions!

Drew Castleberry Curious how this worked out. I have a similar opportunity with 4 properties. A single 75% LTV commercial loan would save me from 4 different closing costs and I am also using my current HELOC for the down payment. Glad I found this post. Any insight?