All Forum Posts by: Kurt K.

Very similar to my situation George Paiva. Currently 2 of the 6 units are on their own. 4 of the 6 share 1 boiler.

When you bought that property did you factor in the cost of that overhaul in a reduced asking price?

Thanks George Paiva. As far as bringing in a "crew" to check it out, it's one of those things that I knew should be done after seeing it, but it always helps to hear another voice saying that it is the right/smart move.

Hey Brian,

I am in the middle of my first deal as well (6-unit house) that may or may not go through. It sounds to me like you are feeling how I was. There is SO much to learn just starting out but there is NO WAY to know it all before you start. You learn the most by doing. The seller I'm trying to buy from as well as the inspector have been doing investing on the side their whole lives and are wealth of information. I didn't know either person till I went and put an offer on a house.

A postive attitude and a desire to do what you really want are REQUIRED to do this. People will tell you your crazy and there are going to be setbacks, if you aren't prepared mentally I think it will be too easy to give up at the first sign of trouble. Persistance, desire. Get started and you'll learn everything you need along the way. Don't worry about the "lingo" and getting everything perfect. Do deals that have large margins so if you screw up a bit (which we all will) you don't get burned.

From my own short experience I already feel a bit more comfortable and like I said, I may not even get the house. But I got experience from talking with the two people and walking through the house, analyzing numbers, etc and already feel more confident as I go forward trying to start in the business.

I was reading a book saying something to the effect that you should do a month-to-month rent for everyone, since even with a lease most are allowed to break if given a 30-day notice, essentially making the lease a month-to-month thing for the tenant since they can leave with proper notice. Does this make sense? I can't remember exactly how it was worded but that was the jist of it.

Thanks for all of the replies everyone.

My angle to this "problem" would simply to have a reduction in the purchase price for the cost of the job. If the seller isn't willing to go for this, then no deal. If say it's closer to $30,000 it is nearly 1/4 of the purchase price. I'd have to assume that any potential buyer would come to this same conclusion that this work needs to be done and the seller will have a tough time trying to sell for this reason. The building has been for sale roughly a year, maybe this has scared away previous buyers as well.

I'd like to think that where ever a problem is that scares people away is the potential for profit. But then again, maybe it is a legitimate undertaking to be afraid of!

Would something like this work? or would it be better just to go through and have it done correctly?

http://esubmeter.com/index.php?cPath=59_70

Thanks for the reply J Scott

Currently 2 units have their own meters. the other 4+ common area is on 1 and the owner pays these. I don't know anything about it but looking at the mess in the bowels of the building I felt a little uneasy as it looked like a tremendous job to do.

I'm looking at a property the house (6-units) was built in roughly 1890-1900 and possibly the wiring needs to be completely redone. It looks like it has been updated/worked on at least once but a total mess in the basement.

I was just wondering the timeframe and potential cost of such a project. I was doing some research online and came up with from anywhere between $14,000 - $30,000 with a week+ of work to do it. Are these numbers in the ballpark? I the house is roughly 2,780sq ft and 6 units as I said.

I know you can't give me exacts and the best option would to have an estimate done, but I was wondering if anyone could ballpark it as it could possibly be a deal-breaker if the cost couldn't be negotiated into the purchase price. Or any experience of the headaches of getting this type of work done while it is fully rented out.

Just looking for any insight on the matter if someone has run into this before.

Thanks in advance.

**Update**

Had the inspection done today. The seller walked us through and opened the doors to the units for the inspector and myself. There were a couple of units that I did not see on the first pass that we went into.

1 unit is absolutely filthy (pizza boxes, clothes, trash, etc everywhere throughout apartment) and the other unit is a lady's that has been renting for about 35 years he said (she is around 80) and she has wallpapered everything, even wallpapered the ceilings with some sort of white paper! Those 2-units were disasters. The other 4 seemed to be in reasonable condition.

There were multiple GFCI outlets that didn't work. The basement was also quite intimidating with wiring all over the place from different work done through the years, even before the current owner. One renter (from the filthy unit) said that their light didn't work and something "went-out" in the unit next to him too. So I don't know if that is further trouble waiting to happen as well. The house was built around 1890 or so with add-on jobs in the basement it looked sketchy.

The inspector and seller knew each other and are friends... but at the end when the seller left the inspector told me he wanted to go over some of his concerns with me on Saturday to discuss potential expenses/work that needs to be done in the home. He didn't hint too much on what concerned him today, but he did mention that he wouldn't buy a multi-unit house where all of the utilities aren't separated (he has done some rentals of his own as well). In this building 2 of the 6 are on their own and the other 4 share. He came across as this being my first one, he doesn't want me to bite off more than I can chew!

More details to come after our meeting Saturday morning, however seeing the basement and the 1 unit made me a little uneasy as there seems to be a lot of work to be done to get things "right".

Thanks for the reply William Bannister. That is a great example of getting a property at a discount for sure! Hopefully I will pull off a few of those in my career :)

This 6-plex has very good "eye appeal" for the area and is 1 block from the college in town so it has a very good location. Also, once rents are raised closer to market levels on 2 of the units it should be bringing in approximately $34,260 gross. After expenses based upon his prior tax returns and the inclusion of debt service the number is closer to $12,800 net (my down payment is $20,000). Where on a 10-cap basis values the property at $128,000 and/or $12,800/$20,000 is a 64% return on cash invested or about 1.5 years till it returns all cash invested and playing with the "house's money".

My goal is to buy and "never" sell so I am okay with buying at market value on this property given it's cashflow, although it certainly won't be a home-run by appreciation standards, by the time I'd sell (ideally) a modest 2-3% over 30+ years it should hold it's value ;). My goal is to accumulate enough rental income to live off of. and once the house is "free and clear" in 10 years, the net should be closer to $21,800 a year. At that rate I'd only need to find a few more of these properties to reach my goal and I'd be on my way to setting a larger goal!