All Forum Posts by: Jim Kaufman

Great ideas. Thanks for sharing. Jim

Thanks everyone for the input. I am putting my SOW together to get bids so it is the perfect time to include these kind of changes. It sounds like I need to build a small closet into the room and although it will be a small bedroom, it will be legal and the other medium size bedroom and master suite should make up for the small one. Thanks again and happy Thanksgiving. Jim

I am working on my first flip :-). I am trying to find out if I need a closet in a bedroom to call it a bedroom for mls listing or if there would be FHA or other lending or appraisal obstacles. I am buying a 3/2.5 in PA and one of the bedrooms is a small 9x9 room without a closet, without an easy way to expand outside of the room. I have read posts outside of BP that discuss this need as a "myth", referencing the HUD/FHA. I have read elsewhere that this is a state and local code requirement. I understand the window egress requirements and I do see that discussed in the local municipal code. If anyone can point me in the right direction, that would be helpful and appreciated. Thanks, Jim

George

Thanks for the post and reply. I agree with your comments. If I buy multi units that need rehab and do a lot of the work myself, my cash flow will be excellent. I purchased this six unit about five months ago now, even after my rent increases, it just stays fully rented (and that is a very good thing :-). As such, I have not had the opportunity to do any major rehabbing on this property. This is my first multi-unit and it is teaching me a lot. After reading many investing books and talking to a lot of other investors, I have put my multi unit purchasing on hold and I am not flipping a few properties to better understand how to properly buy and how to rehab. I plan on then moving back into buying multi units, hopefully some that need to be rehabbed, but are in acceptable neighborhoods. Most of what I have seen so far has been in rough unacceptable neighborhoods. I need to find a better source of finding these kind of multi-units. They do not look like they make it onto the mls. Any thoughts on the best way to locate these beside driving around and networking? Thanks again for your comments. Jim

Sounds good Michael. It is a process getting things to run smoothly but consistency pays off. I am getting ready to close on a six unit in two days and the amount of things being mismanaged in this property is staggering. But, I have a good vision of where I want to take the building and we will do that one step at a time. Sounds like you are doing the same thing.

One of my thoughts on splitting the utilities out is to take the garbage fee and split and bill separately to all of the tenants. That seems logical even though the tenants will not be happy with the change/increase. More challenging is the splitting water, sewage, the two hot water heaters and two boilers amount the six units. I have the lease stating that the tenants will pay for all but the water and sewage so that is part one. If there is a minimum charge by the water and sewer company for each apartment/sfh, and I pick up the difference, that would at least be a partial reimbursement by the tenants and possibly a reason for them to conserve. I am not sure what is legal in PA so I will have to investigate that. It looks like it will take years for me to convert so that was why I wanted to see if there was a better way. Thanks, Jim

Hi Michael

I am curious how you resolved these. I have recently experienced multiple mis-statements in a purchase which I think comes down to buyer beware. Also, I am currently trying to decide how to bill some common utilities like trash separately. I am in Forest Hills. Hope all is well on the rental front.

Jim

Hi Dawn. Thanks for the reply. I need to rewire the units and most likely install baseboard heat, upgrade kitchen and baths, etc; so it would be very difficult to do this while occupied. I am targeting $650 rent but I have not completed my rent comps. Many one bedrooms are renting for $595 plus utilities.

I am getting ready to close on a six unit building. As soon as I close next week, I will have to work with four of the leases expiring at the end of July. There is little consistency in the rents running from $500 to $595. My long term goal of the building is to refurbish all units, convert the dining room to a second bedroom and finish splitting out all of the utilities. The splitting of the utilities needs completed from the basement up so it would be best to start on the first floor. With one of the first floor units at $500, it makes sense to me to not renew this lease (giving them a month or two to find a new place) and starting with that unit as our first rehab. I would then renew the other leases, looking to keep five of six units leased at all times. One thought is to give the current tenant an option to move into the refinished unit as an option although the difference in rent could be $100. There seems to be a fine line between managing turnover and maximizing the potential of the building, which I plan to keep for many years.
Is this the best strategy or am I missing something? Any input is appreciated. Thanks, Jim

I am looking at a multifamily house built in 1925 with a sandstone foundation. The basement is damp as I would have guessed and dehumidifiers were in place. Of course, we have just had a major storm. I am not sure if this is something that I should be concerned about. I will most definitely get a professional to look at it before closing if I move forward. The walls look sound and straight but damp along with the floor. A foundation replacement is very expensive. Any help is appreciated. Thanks, Jim

I have a six unit under contract in Pittsburgh and I am doing my due diligence. Purchase price is $35k per unit. All six are rented. It is in a nice solid neighborhood one block from police fire and bus line and ten blocks from where I live. Rent is $500 to $595. They are all one bedrooms with LR, DR and eat in kitchen. I plan to convert the DR to BR2. Max rent for area would be $675 if they are fixed up. The low rent units will be raised asap trying to keep 5 of 6 rented, one open to rehab at a time.

Heat, water, sewage and trash are paid by landlord at $104/mo. per unit. Heat cost is $50/unit (two newer boilers). Foundation is solid, brick is good, shingles are good, flashing needs replaced around four chimneys and should be done prior to closing. I would hold building for 20 years.

The maintenance is a classic case of defer everything. Kitchens and baths need redone. It is lathe and plaster, typical of the age. There are new electric boxes for all six units split out with a couple circuits run up to each unit, probably just in the kitchens. The majority of the electric wires in the walls are knob and tube.
I have gone through some great forum discussions on landlord paid utilities (most discussions say run away fast :-). There are also similar discussions about knob and tube. The preliminary electric estimate to re-wire each five room unit correctly is $3,500 or about $20k for the entire building.

I have 5 sfh’s but they are all newer, out of state and under management so this will be my first hands on project. I just became semi-retired and want to move into RE investing full time.

Option 1 - My original thought was to go in to the first unit that becomes vacant and do a full rehab. I would refurbish kitchen, bath, electric and floors. My estimates for the five room 900 sq ft was in the $15k range which I think is tight given the electric costs and the fact that I am more of a GC than carpenter.
After the shock of coming up with a $15k budget, I am now thinking that I may be better off doing a lighter rehab.

Options 2 – Upgrade electric, fix walls from electric installation, upgrade just what is needed, paint, floors, rent at market values.

Moving utilities to the tenants - one option is to add baseboard heating units, especially if we are already working on the electric. I have not worked with these before but it looks like the hydronic units were running about $1,200 on the high end for five rooms. Most of the units have metered natural gas but I am not sure if there are good options there for individual heating. I will check on passing on trash costs.

Option 3 – Pass on this deal. I do not expect this to be my best ROI or a great deal to brag about how much money I am making. I do expect this to solidly get me into multi families and set me up for better future apartment building purchases. As long as I protect myself from a loss on the property, I should be ok.

Cap rate – If rents are all raised to $640, if I use 4% vacancy, 5% maint, no management fee (not sure if that is normal), and add baseboard heating, I would increase the value of the building by $75k (10% cap rate), which I could theoretically invest at $12,500 per unit and breakeven.

I would love some feedback on the above. Any help is appreciated. Thanks, Jim