All Forum Posts by: Lawrence Sudweeks

I typically aim for a 10%-15% profit for my rehab after all is said and done.  If I am wholesaling the property, I'll add a $3,000 - $5,000 Wholesale fee for me.  Typically, I like to keep my profit between 1/4 and 2/3 of the rehabbers profit.  

I use the formula of After Repair Value times .7 or .75 depending on where the market is.  This accounts for their profit, as well as holding costs, closing costs, etc. I then subtract rehab budget, and subtract my wholesale.  This gives me my Maximum Allowable Offer.   Any higer than this number, and it eats up the profit for myself and my cash buyers.

Thank you @Gregory Hill.  Barker is retiring soon.  He was "managing" the property I have under contract.  One tenant is nearly $1,600 behind in their rent.  Each tenant was set up on a month to month contract.  He doesent even have the contact information of the individuals on their contracts. There were some major water leaks in the upstairs bathroom that have never been addressed, and caused major damage to the lower hallway.  These are unexceptable practices for a property manager.

Does someone have a good contact for a property manager in Twin Falls, Idaho?  We are closing on a 4-Plex in Buhl, and are having a hard time finding somone who can manage the property.  It is only 16 miles West of Twin Falls.  Maybe someone knows of one in Buhl? 

These are the number from the current owner now.  He has not been running it very professionally.  To get a much more accurate figure, my friend has adjusted maintenance, replacement, management, and increased average rents.  He may be able to negotiate a better deal with the owner due to showing proper expenses and building maintenence. 

Thanks for all your input.  @Aaron B Lee, this is the only property owned by this retired school teacher, and he "managed" it himself.  He only held back $2400 a year for maintenance, and held nothing for major long term replacement.  His rental rates also have not changed in a decade.   He has been trading rent for one of the units for a person to respond to calls and needs of other tenants instead of using a professional management service. 

He also has not advertised or done anything for new tenants except word of mouth from existing tenants.  This has given him a 10% vacantcy rate.  There are also 3 commercial units of which 2 are vacant.  

In re-calculating the numbers, my friend has added $900 a month for professional rental management (10% of rents) , $455 a month for long term replacement needs, and $1250 a month for proper maintenance.  He also run the numbers with changing the average rental per unit from $343 to $410 which includes a 5% vacancy rate instead of 10%, and still does not consider the 2 unrented commercial units. 

Running the new numbers gives a cap rate of 10.09%

@Darryl Dahlen, that is an interesting idea in doing 3 bulk payments of $25K for the first 3 years.  The owner is not investment savvy and is concerned with tax implication of selling out of the property.  I'm sure he would consider other strategic options. 

@Billy Gulley I will deffinately look into TIC. Not familiar with it.

Hi BiggerPockets heros.  A friend found a 22 apartment complex in Idaho where the owner is ready to retire. It is not on the market, and has signed an exclusive with my friend and given him 60 days to figure out financing.   He is asking $450,000 for the property.  The property brings in a Net Income of $4,500 a month after all expenses (not including mortgage). The rents have not changed in over 10 years, so those numbers should be a bit higher to reflect the value of the property. This number includes subtracting for management, repair costs, saving for major replacements, vacancy, taxes, etc.   This owner is willing to carry the note on the property with a $75,000 upfront payment. 

Standard financing is not available to my friend due to marks on his credit for medical bills etc.  

What are some creative ideas you have for making something like this work?  Thanks.

We want our properties to go through smoothly, so making sure your partners can come in to look at the property is important with wholesaling.

RIGHT TO SHOW ADDENDUM 

ADDENDUM to agreement of sale dated ___, between_____  , Seller, and___________ , Buyer and his assigns, buyer of all that certain property located at

___________________________________________________________________ .

The terms and conditions of this addendum shall prevail in the event of a conflict with the terms and conditions of the attached Agreement of Sale. 

Buyer reserves the right to show property prior to settlement for the purpose of either renting it or reselling it, and Seller agrees to permit access to Buyer at any time from the date of this agreement up to the date of settlement. 

Witnesses:

Buyer Seller

Buyer Seller

Reviewed By: Attorney: Bar Number:                            

I will post some of the addendums I use:

Inspection Addendum.  I would use this with a wholesale strategy.  This is in case I have have a property under contract, and all of my typical cash buyers are either not in the market for another property, or they do not like the property as an opportunity.  It can releive the contract if your "partners" (i.e. your cash buyers) are not interested.  It is not only an inspection, but acceptance of the terms of the contract we will be assigning to them.

Inspection Addendum:

ADDENDUM to agreement of sale dated ,_____ between _________, Seller, and ______________, Buyer and his assigns, buyer of all that certain property located at address ___________________ . The terms and conditions of this agreement shall prevail in the event of a conflict with the terms and conditions of the attached Agreement of Sale. 

This offer is subject to Buyer's inspection and/or Buyer's partner's inspection and written acceptance of the same delivered to Seller within seven days of Seller's acceptance of this offer to purchase. 

Witnesses:

Buyer Seller______________

Buyer Seller______________

Reviewed By: 

Attorney: 

Bar Number:                            

@Raj Parwani

I think I know what you are getting at.  It is so difficult sometimes to find the inbox eh?  It takes me a while every time.  Hover over the "Alert" Bell at the top right of the screen and you will see the link to your inbox.

Hope this helps.