All Forum Posts by: Jeff J.

In my opinion, you should understand how you can increase the value of your investment. If you don't understand where the hidden value lay and how you can unlock it, you are speculating. So, having a strategy that you can execute is your risk mitigation / reduction strategy. Your risk management is exercised by acquiring your investment at a price point that gives you the financial flexibility to alter your selling/rental price point such that you can deal with risk events - this essentially allows you to accept the risk in the event it is realized.

If I were in Durango, I would look toward Farmington, or east toward Bayfield (is that right?). I saw an interesting listing on craigslist there, I think, a few weeks ago . I've seen reasonable land and home listings up toward the ski hill over the years, and Silverton or Ouray might have potential...but maybe the train has already left for those places (although I have found pretty cheap mine claims in Silverton, recently). As I recall, there was a multi-unit camp for sale on Vallecito a few years ago that maybe had legs with some creative thinking - but that was a 7 figure project. Anyway, opportunity is everywhere if you look for it. My 2 cents -

I've bought land, and spent a lot of time researching land. There are times when land is just cheap, about 10 years ago you could by big tract land in the north-east Kingdom of VT for well under $250/acre, withing 3 years you were luck to find it for under $1000/acre. Fifteen years ago Hawaii was cheap, I'm certain there are geographic places in the US that are undervalued for whatever reason. Sometimes it's a tough piece of property that has potential, but needs a little elbow grease, you can sometimes find good deals on land owned by Trusts, sometimes you can find someone how needs money and will undersell (that is actually the issue with Trusts). The key is that you have a good understanding what land is worth so you are buying at a good price, and then you also have plan on how you intend to unlock it's potential. Buying at market because someone thinks it will rise in value is a losers game.

Hi Sam,

I'm no expert, but I've bought 60 apartments in two transactions and am working on two other deals right now. I have only dealt with traditional lenders. My experience is that they want the deal to show good financials, they don't want to finance dumps - even if your plan is to renovate, have cushion in the appraisals based on going CAP rates, and you have to show up with at least 20% down.

Or you could put an offer in that splits the buyers commission with you and the listing agent, where the listing agent handles the administrative end of things, and your cut is taken off the purchase at closing.

Mortgage is not an operating expense. Also, some of the repair and make ready might be capital, FWIW.

Here is the Florida statue concerning landlord right to enter......

83.53?Landlord’s access to dwelling unit.—

(1)?The tenant shall not unreasonably withhold consent to the landlord to enter the dwelling unit from time to time in order to inspect the premises; make necessary or agreed repairs, decorations, alterations, or improvements; supply agreed services; or exhibit the dwelling unit to prospective or actual purchasers, mortgagees, tenants, workers, or contractors.

(2)?The landlord may enter the dwelling unit at any time for the protection or preservation of the premises. The landlord may enter the dwelling unit upon reasonable notice to the tenant and at a reasonable time for the purpose of repair of the premises. “Reasonable notice” for the purpose of repair is notice given at least 12 hours prior to the entry, and reasonable time for the purpose of repair shall be between the hours of 7:30 a.m. and 8:00 p.m. The landlord may enter the dwelling unit when necessary for the further purposes set forth in subsection (1) under any of the following circumstances:

(a)?With the consent of the tenant;

(b)?In case of emergency;

(c)?When the tenant unreasonably withholds consent; or

(d)?If the tenant is absent from the premises for a period of time equal to one-half the time for periodic rental payments. If the rent is current and the tenant notifies the landlord of an intended absence, then the landlord may enter only with the consent of the tenant or for the protection or preservation of the premises.

(3)?The landlord shall not abuse the right of access nor use it to harass the tenant.

History.—s. 2, ch. 73-330; s. 5, ch. 87-195; s. 4, ch. 93-255; s. 446, ch. 95-147.

Ask the owner or agent for the rent rolls, profit and loss statements and tax returns for those associated years. I don't assume people lie on their documentation, but analyzing what they do is a bit of a balancing act. Operating expenses need to be leveraged against building age, building infrastructure age and condition, and the condition of the actual apartments along with reasonably expected expenses. Capital upgrades also need to be considered. Someone can manage low operating expenses and mine cash out of the property, but that is at the expense of the physical plant, and visa verse, but that should all be sussed out if they are booking capital correctly. If their documentation is substantially different from their tax return I would be pretty careful with my approach to the deal.

After assessing their reported expenses, you need to recalibrate with your own expense assumptions, near and mid term capital upgrades to arrive a CAP rate that will cash flow, pay for repairs, maintenance, upgrades and save enough money to replace end-of-life infrastructure.

Your plan of test driving your analysis skills on several real live properties is a good one. You will get comfortable assessing the valuation, and get to the point where you can find a good deal. Good luck!

Also, if they are reporting capital upgrades as operating, that could be jacking the NOI.

Well, you can just cash out your 401k, and swallow the penalty and tax implications.

Another option would be to incorporate your business, start a retirement plan, transfer all your 401k / IRA money into the company retirement system, swap the cash with shares, and use the cash to expand the business.