All Forum Posts by: Samson Kay

@John Weidner Hows the bridgeport area? Still safe?

@John Casmon I'm finding the same is true in the Boston metro market. MLS deals get snatched up immediately.

@Brie Schmidt No, my job is actually in Bolingbrook. I realize decent parts of chicago put me at about a 1 hour plus drive to work. I'm ok with that because I'd only plan on living owner occupied for a year then move to another building. I've been looking everywhere from naperville to evanston though. I wanted to live in west town or near wickepark but im thinking thats a pipe dream at this point.

My only requirement is that its in a B neighborhood near the city. What I'm finding is that the B Neighborhoods are so high in price that they don't cashflow at all even at 100% occupancy. Rents just dont seem to justify price.

Right now im reevaluating the owner occupied strategy. I might just pool my money to acquire a larger building and then either buy a condo or rent a flat in an area I want to live. I'd still cash flow enough doing this to keep my cost of living down.

lol. @Mike Hurney .

My agents in mass are alwAys on point. And I have a good enough understanding of the market around here than I can justify numbers and prices relatively accurately.

This was for the Chicago area. I agree with you though I think I need a new agent

What areas are those?

@Anthony Gayden

The two properties that I looked at yesterday were priced in the 500K range. But all the units were making less than 1000 per unit. Assuming that I didn't end up living in one, and just rented out all three units, I would make less than 36000 per year. But with taxes as high as 11000 per year, and then insurance around 2500, and any other expenses (water, trash, heat, general maintenance), my NOI for both these properties work out to be still less than 20000 per year.

Let say I net 1500 per month conservatively. My plan was to use an FHA mortgage with 5% down for a debt service a little less than 3000. Meaning I would have to come up with another 1500 out of pocket. This essentially becomes 2500 a month since I would be required to live in one unit for a year! Thats not even including living expenses. It would actually cost me more here in chicago than in boston.

I mean the reason I was leaning towards the FHA mortgage, was so I could buy maybe another property like a couple 12 plex or 20 plex, cash flow on those, while essentially living rent/expense free in a multi. It worked for me in new england.

Thinking about it now, It might be a better strategy to pool all my capital into just a large building that cashflows well. and then buying a hud house or condo to fix up and live in and bet on the appreciation of that kind of property, rather than hoping for appreciation of a building where rents are way too low to justify the price.

Two trips to chicago, and 14 showings later, my agent dropped this little bomb on me.

"Given your commute and this market, a 3-4 unit building isn't going to cashflow enough to cover your whole "nut", you're going to have to come up with money each month."

Now, where I'm from, I'm used to rents being high enough to at least cover the mortgage and all my expenses, even if I have to pay a little out of pocket each month. But all the properties that I've seen in chicago, with the taxes being so high, and with landlords paying things like heat and water, the buildings only cashflow enough to cover operating costs. Meaning I would have to pay 2-3K out of pocket and thats assuming I rent out the entire building and dont live in a unit.

If thats the case, whats the point of buying a owner occupied multi in chicago? I get that prices for a 3-4 family in a desirable neighborhood will demand higher prices, but if the rents don't justify the asking price, why would anyone consider purchasing there? I'd rather pay 500K for a single family in the same neighborhood and not deal with tenants if I didn't make enough to at least cover debt service and taxes and insurance.

Feeling frustrated. :/

My agent thinks I need a new strategy. What do you guys think?

Rents are actually 535. You think an incremental raise to 575 along with passing expenses is more reasonable? Perhaps I'll apply the change with half the units and the other half 6 months later to avoid a mass exodus

100% owner financing was actually my brokers idea. Apparently there's another owner finance offer. I think the best play is to pass down the expenses to the tenant to reduce the expenses which are ridiculous.

That being said you are probably right about raising rents simultaneously as being excessive. Next year it might be ok to raise rents further incrementally

Nice work. You really changed up the flow of the kitchen. How much did you spend on just the kitchen rehab if you dont mind me asking?

I just sent in a LOI (Letter of intent) on the purchase of a twelve unit apartment building using Owner financing. Basically I will be able to take possession of the property for his cost of commisions and any closing costs related to creation of the mortgage.

I wanted to see what everyone thinks about my strategy. Here are the numbers

Purchase Price: 290,000

interest rate is 8.5% with 5 year bubble payment, 30 year amort.

NOI is 27,868

for a cap of approx. 9.6%.

Cap Ex in the near term I estimate to be around 25000, for basically a new rubber roof and water heaters.

Current owner is retiring and is looking to sell his property for some passive income. But at these numbers I'm getting into the property for basically a thin cash on cash return of 1109.85 for the year. Terrible numbers.

BUT.

Rents are below market by about 100 bucks each unit. All the tenants are at will. So my intention is to immediately raise rents for a quick return of 1200 a month after Debt service. Then I plan on spending approximately 10000, to submeter both gas and water and pass this expense on to the tenant. This will reduce my annual Operating expenses by approximately 11000 per year.

Changing my NOI to approximately 48400.

At the same cap rate as what I bought it the value of the property will increase to $504167, a net increase of approximately 504167 - (290000+25000capex+10000submeter) = 179167 in less than one years time.

In addition to this, Since my loan to value is 290,000/504167 = 57%, I plan to cash out refinance to recoup my cap ex and submetering investment and reduce my monthly payment in 6-12 months to the market rate of approximate 5.5% for additional cashflow.

I think this looks like a great deal since I have low front end cost and barrier to entry.

What do you guys think?