All Forum Posts by: Kyle R.

Originally posted by @Andrew Johnson:

@Matt Pulliam Side note, submetering water (in many cases) is a pipe dream.  It can be *thousands* per unit and that assumes that the city allows it.  It's much easier with electric, gas, etc.  And with 20+ units you're missing general break/fix expenses, landscaping is needed (and not free), and even post-renovation you'll need cap-ex holdbacks.  That's said, those things pale in comparison to the 71% rent increase posit.  Also hoping that you used a 20 or 25 year amortization (not 30) when calculating debt service.  😬

Very true. I have a complex I considered submetering but did not for all the reasons mentioned above. It would be interesting to see what the water rates, along with consumption are at this property. Water/sewer combine last month at my 80 unit was $2,941. This includes a Laundromat I have on site too.

I'd consider looking into a series LLC. Much easier than creating a LLC for each property and offers the same protection.

I would not pay $1.235M for an $11.6k/month rent roll. Not going to comment on vacancies, repairs, etc as I don't know the property. We'll assume your numbers are solid. If you're financing the property, let's assume 20% down, 5% over 20 years, your mortgage would be $6.5K/month. With a NOI of 63k, your monthly cash flow is nearly -$1,300.

Take this with a grain of salt as it's been a few years since I've been to Chicago, but I view 63rd and Halsted as a war zone. Out of the 77 communities in Chicago, the Chicago Tribune ranks it as the 9th most violent. Personally, I'd be looking for a cap rate higher than 9.5% if investing in Englewood.

I assume you already have an LLC set up and your income is running through there? If so, they'll primarily base the loan off the LLCs performance, not W2. However, I recently picked up an 80 unit and they based it off my W2. This was due to the fact that I placed the property in an empty LLC.

In my personal opinion, I believe it depends on how often you conduct business with them. Between evictions, creating my LLC, etc I have five lawyers. None of them have charged me for an email, call, or nickel & dimed me. I also have an accountant who's fees are north of $200/hr, but only bills me for his support staffs time, not his. They do this because I keep them busy. If I was a sporadic client, I'm sure the fees would be higher.

I purchased my first multi this year and it was sourced through my realtor. I was originally looking at a 12 unit and he mentioned he knew someone with an 80 unit that may consider selling. Kept it off market and was able to acquire for far less than what it's worth. Moral of the story, networking is key. Talk to as many realtors as you can and let them know what you're looking for. Another way, which you mentioned, is direct mail. If you do this, I'd recommend sending the letter certified so the receiver won't think you're blindly mailing anyone with a multi.

Originally posted by @Joshua Feit:

Hi! 

Friendly disagreement: I think you should have an LLC when you start out.

LLCs are very easy and inexpensive to file. With that in mind, why not just establish your LLC today? Go online, get it done in 20 minutes, you'll hear back in a week. Then, you're all set.

Go for it!

Friendly disagreement. Don't rush into creating a LLC. Do your research and find which state you should file in, along with which LLC structure is most beneficial to you. A generic LLC will not fully protect you. I paid nearly $2K to set up my LLC and it was worth every penny.

Don't do it. I rented to a tenant last year who had an eviction in 2010. They've consistently been 15-20 days late on rent each month. Rent was $1.2K and their income was $80k year. Don't get me wrong, some people do change, but the odds are stacked against you.

Originally posted by @Account Closed:

Originally posted by @Kyle R.:

Originally posted by @Account Closed:

Originally posted by @Kyle R.:

Originally posted by @Account Closed:

Originally posted by @Kyle R.:

 Are you saying you recently bought an 80 unit  apartment in Alexandria MN at that price? This would be a property in a similar condition not requiring rehab? The price per door will often vary per market.

The property required no rehab and was constructed in the 90's. The only issue that came up during inspection was two broken rafters, a couple disengaged shingles, a few holes in the vinyl siding, and cracks in the sidewalks. Total estimate to fix everything was about $5k. Property was 100% occupied at takeover and located near Charlotte, NC.

 Interesting... for all we know, you may have overpaid for your property based on what the market rate is in NC. Some areas in MN price per door is between $70,000 to $75,000. That is within the state of MN. I included a map here just so maybe someone else can help count how many states exist between NC and MN :) Again, different markets have different prices and cap rates. In New York for instance, $400,000 to $500,000 per door or more is normal rate.  

The property is currently performing at a 13.6 cap with rents 25% below market. Don't worry, I'm well aware of how many states exist between the two. I'm just not interested in paying 233% more per door when the rent rolls are the same. When I invest, I focus on cash flow. Paying under $15K per unit with rents averaging $400 a door is hard to beat. The per unit market price for this complex is $22K.

What kind of rent are you getting per door for $75K? By purchasing 80 units at $14.9K with an average rent of $400, I can purchase five units for $75k with a total rent of $2k. If you're paying $75k a door and bringing in more than $2k, my hat is off to you. I understand market prices vary, which is why certain markets are less financially advantageous.  At the end of the day, you're buying a rent roll. This all comes down to math, right? I can't see why spending $2.8M for a productive asset in Alexandria that generates an equal return of a $1.19M productive asset in Charlotte is a better decision.

 If you are in rentals then the core objective always is cash flow. 13.6% cap rate is sort of high and usually is the case for a low C or D area. What is the vacancy rate? Is it an economically depressed area? What is tenant turnover like?  Of course you are paying for cash flow but the certainty of the cash flow is also an issue.

It's a class C area. It's not an economically depressed town, it's actually going through a mild boom. A private university just announced they're moving their masters in health sciences program three miles from my complex. This will bring 200 students to the community. 

Vacancy rate has averaged 4% over the last three years. Turnover is minimal and my PM received 3-4 calls a week from prospective tenants wanting units. Only problem is I have no vacancies for them. Collections aren't an issue. 

Still curious to know the rent you're getting for $75k a door.