All Forum Posts by: Tammy Richards

@Lorenzo Clark, thank you, great idea to connect with local realtors - and yes, my home inspector guy was great, encouraged me to not think I have to make all repairs at once but can prioritize, and told me what needs to be done ASAP/First - I think I could definitely contact him in the future for ideas/referrals and cost estimates.

@Helen Rolls, yes, I remember that article about CapEx expenses and it made a big impression on me - I suppose what's "easy" about this purchase/CapEx is that everything needs to be replaced fairly soon (half of the heating system, roof, foundation work, and windows!). So... I had already figured those costs and taken them into account when I put in the offer.

@Chris Seveney, yes, heat is included often in apartments in this area.  I plan on renting to Section 8 tenants, and actually, find the allowance for heat for Section 8 to be pretty accurate for the "normal" building.  One of my strategies will be to put money into energy efficiency to decrease heating costs, and increase my cash flow - Maine has some good loan programs/rebates that can really help tighten up a building, and finance efficient heating, so I'll be taking advantage of those.

@Brian Burke that makes a lot of sense - thanks for your response!

I'm just about to close on my first four-unit, which is probably typical of what is available in Maine, in this type of neighborhood, at this price point - which is old housing stock, tons of deferred/poorly done maintenance, and relatively high labor/construction costs.  So it will be an education for me to track expenses for this property over the next few years.  

It seems easier to estimate CapEx - I know the big ticket items and roughly how much a new roof is, how much a furnace is, how much an oil tank is, etc..

For the ongoing/routine items, I'm less sure - though have a pretty good idea of some routine stuff, like lawn mowing, other things feel like a complete guess, like how many plumbing calls will I'll need per year per unit? 

So as you say, these things will come with experience.  Guess I'm about to learn a lot!

I love analyzing multi-units, and have a couple of different spreadsheets from different sources. I'm wondering how folks estimate CapEx, maintenance/repairs, and turnover costs?

My current spreadsheets use 10% of gross annual rent for maintenance/repairs and 5% gross annual rent for CapEx. That's fine, but it seems like it would overestimate costs for a high rent/higher # units property, and underestimate costs for duplexes and lower rents coming in...

Do people use other methods than this?  Maybe % of purchase price (though that would mean low estimates for killer deals, and higher estimates for hot market properties)?

I owned a duplex on Munjoy Hill until about 8 years ago, so my experience is not recent - and I hope for your sake things have changed.  Portland City Hall used to drive me crazy.  Whenever I had a zoning question, or an inspection question, I'd get different answers, depending on the day, or the person I asked.  What seemed to work best was hiring contractors who had a personal knowledge of the Portland inspectors, and hiring an architect who had worked in Portland before and knew that office was a good move as well.

I am by no means an expert, but I am wondering how certain you are about being able to get the rents you are describing?  While the Waterville area is economically stronger than much of central Maine, rents are very low - student housing is very cheap to find, there are nice condos in Waterville that rent for well under $1000, and to purchase a home in the area is very affordable.  I understand you are looking at building "executive housing"; perhaps I am unaware of who the transient executives would be in the Waterville area who would be interested in renting what you describe?  In any case, I recommend you really dig into how big your rental pool actually is, and carefully scout the competition that is currently renting to your prospective clients to make sure you'll make the cash you are estimating.  

You are wise to start so early.  You have a number of unique assets, and I would advise you to start out with a live-in multi.  You can learn to landlord, obtain cheaper financing for your first property.  I bought a two-unit in Portland as my first house (back when it was affordable), and learned about maintaining a building and managing tenants - and I got a cheap place to live.  I think your first step is to figure out where, location wise, you and your partner want to settle and/or invest - that's your first step.  You can always move on, and those initial investments can be sold/property managed, but at this point it seems like your first decision is geographically where you want to live, and where you want to invest (if you purchase a live-in unit, they will obviously be the same - at least for a while).

Welcome from a fellow Mainer!

I've been looking at properties for months - come close to purchasing a couple, but have not been able to get the price I want for the cash flow I am insisting on.  So I've been at this a while.  I have analyzed, at this point, probably 300 properties using one of the downloadable spreadsheet in the BP files section.  

I have to say, I now have a much quicker idea of whether a property will make sense when I run the numbers than I did a few months ago.  In my area, with old property stock, and with heat often included in the rents, it has to have huge rents to make sense - in my price range, that means big units, and a 4 unit vs. a 3 unit.  There are also a few towns with taxes that are higher,  or lower, that I know I have to account for.  

The 2% rule isn't a great quick view in my market, but now often know from looking quickly at the MLS/rent amounts/number of bedrooms whether or not to bother plugging in numbers on the spreadsheet or not.

I'm also getting better when I go see properties - having had one deal crash after an inspection, I'm much more aware about potential foundation issues in the old buildings around here.

I'd encourage you to take the time to find a spreadsheet, or calculator you like, and run a bunch of them. You'll learn your market that way. You'll learn the tax rates of different areas, rents that different locations bring, and what adding on property management, maintenance, and CapEx expenses does to the spreadsheet. After a while, it won't take long to get a quicker sense of whether or not a property will work for you, given your particular criteria.

Welcome Lisa. I'm new as well, lots to learn here.

Can't wait to hear more!  I used to own a 2 unit on Munjoy Hill.  Lived in and rehabbed a house with great bones, and lots of work needed.  Still miss it!