All Forum Posts by: Joshua Martin

Rob Witt Thanks for the help Rob and everyone else too. I'm looking at a 6 unit with pretty impressive numbers, but given the particular lender it would require 25% down, or in this case, 17k. If I was understanding correctly, you'd be demanding a 100% COCR? This property would perform a little less, but if all goes well, still way way higher than a return you could hope for in the stock market. Numbers are posted under deal analysis Do We Have a Deal? If you were interested, But they have been adjusted a little since. To be fair, as important as cash flow is (and is what I'm looking for), I'd settle for less than 100% ;) thanks guys. JTM

Matt Austin Welcome! The steps are simple: get involved with that REIA, as another fellow told you, read the guides on BP, listen to the podcast, start educating yourself, and start analyzing deals. I don't actually know that much, I've only been at this about 4-5 months, but am trying to put my first deal together. From what I know, Madison can be a good market if you find the right deal, so you could totally start there. Just dive in, hardcore, and it'll work out. Learn as you go and ask questions. The team building will just come as part of doing it, not something that needs to be done a year in advance (for example, now that I have need, I've been talking to lenders and met a great contractor, I'll also need an attorney in short order, so I'll be reaching out there too). I find it helps when you have something to talk about and don't just say, "I might buy a property in a year or so," -- I tried that, and understandably, people were only slightly receptive. Best of luck, and you got this, JTM

Rob Witt Hey Rob just a clarification for my own personal use. You said you should only pay how much it is cash flowing? Do you mean as a down payment? So if a property is set to cash flow 13k after debt service and all expenses, you'd only be willing to put down 13k and the price would be relative in some way to this number? Thanks for the clarification. Best. JTM

I've been in touch with Waterstone lately about a commercial loan, and they seem helpful enough. A few investor friends recommended them on the fact that they have been known to do 'character loans, and be aggressive,' both good for a newbie investor. Pyramax may also be a larger bank (I'm not sure), but I know people who also work with them. Just call any, see if they're helpful and how it goes. The truth is, of the deal is right, they all want to loan you money. Best of luck, JTM

Hey, I'd say a waste of time. I went to the 2 hour seminar, sounded awesome but they just tease you with info, then I signed up for the 3 day ($200), then jumped on BP and read about what a waste of time it would be, and canceled my reservation. Everything you need you can find on BP or in books. I'm moving along steadily towards my first deal. Hope that helps. JTM

A friend was just telling me about a 4 unit on 6th St. a block or two south of national. He was saying the area is a bit industrial but not that bad. He told me to do a Zillow search and that itd be the only property to show up in the area. Disclaimer: I have not checked the listing nor do I know anything about it. But good luck!

@Wade Sikkink

 Thanks for the input Wade. Do you have any good tools for estimating what the monthly payment might actually be on a property when using a commercial loan? Or how balloon payments are handled?

Thanks. And thanks to everyone else too. I'll run the numbers again as soon as I've updated them.

JTM

Thanks again everyone. I'll keep you posted. 

@Account Closed Maybe you're right. I do want to be taken seriously, so I shouldn't lowball. Thanks for the tip. 

Thanks for both of the replies.

@Brie Schmidt

 I wonder if you could fill me in just a little more on a detail or two. What does the 'seasoning period' signify? Or does that just mean the amount of time before you could refi in some way? Also, when you say commercial lenders typically require 20% cash and 3 months reserves, 'reserves' amounts to what? Sufficient cash to pay down the debt service for 3 months?

The ridiculous interest rate for the seller finance is just a proposal - I do think the seller wants to move on from the property, so who knows what he'd actually be willing to take.

Water is accurate for the 4 family, that's the quarterly average from the city for the 4 unit. It would certainly jump once the studios were finished.

Lastly, do the commercial lenders typically not allow a seller to finance any of the deal? I'll be meeting with one soon just to start a relationship, but good to know in advance.

Thanks Brie, as always, good and valuable insights.

JTM 

I also posted this in Multifamily discussion because I wasn't sure where to go with it, sorry if someone is getting it twice.

Hey gang,

So I'll try to make this post as detailed as possible with what I'm currently going on, and I thank you in advance for your help and guidance.

I've had my eye on this property for a while, and it has actually just been removed from the market (but this doesn't mean I can't make an offer). It is a six unit on one lot, a four family and a duplex behind. Here are the size and rents for the units:

4 family:

1 3 bd @ $695 p/m

1 2 bd @ $645 p/m

2 1 bd @ $525 p/m = $1,050 p/m

Now the deal becomes interesting, because the duplex is not finished. I'll get to that shortly, but once renovated:

2 studios @ $425 p/m = $850 (but just call it $425, because I'll live in one of these).

Asking price: $79,900

What I want to offer and how I want to propose it:

Offer: 70k, 3k earnest money, seller carries 12k for 3 year term at 3%.

Renovation (this is fairly crude until I walk through with a good friend of mine who has been at this a while): 40k - I would also hope to save on some of this by doing much of that myself. This money I can borrow privately at 2%, undetermined term but I would hope to refinance once the property was up to par and rented out.

All in: 110k

So that I'm not misleading, I'll say here that the area is probably C-, right on the east edge of Washington Park for you Milwaukee natives, and that this could pose difficulties (or perhaps scare off many investors?).

Crude analysis:

50/50

Monthly rents $3,340

50% to expenses, 50% available for debt service: $1,670

Debt service $611 (An estimate of trulia of 83.2k @ 4.125 amortized over 30)

Cash flow: $1,059 ~ Annual, $12,708

1% Rule:

Purchase price (all in) 104k, monthly rents, $3,300 = 3.1%

And now, sorry this will get a bit longer, a slightly more detailed form (the best I can do at this point):

Gross monthly income: $3,340

Monthly Expenses:

Vacancy @ 8.3% (local property manager though this was accurate) = 277.22

Water & Sewer = $102

Management @ 10% (although I'll do it for the foreseeable future) = $334

Garbage? @ $15

Taxes: $197

Insurance (I have no idea how to get crude quotes) so, $75

CapEx @ 10% = 334

Total Monthly Expenses = $1,334.22 (of which I'd be currently paying myself the $334).

Available for Debt Service: $2,006

Estimated Debt Service: $700 p/m (rounding up a little bit - I know, still quite crude).

Cash flow: $1,306 @ $217 per unit.

In short, it looks to me like a difficult but good deal. Partly I'm wondering what I'm missing (because I have a hunch there's something), and I'm also a bit sketchy on the details of estimating various debt payments. The number I want the seller to carry, for example, and how that is 'typically' structured.

It also looks like an education in investing, so I'm torn. Talking to a commercial lender about possibilities later this week. I'd appreciate anyone chiming in, particularly Milwaukee natives who might not like the area (but guys, keep in mind you have Washington Heights just to the west and the lovely Martin Dr. neighborhood just south ;).

Again, thanks in advance.

Best,

JTM