All Forum Posts by: Michael Catausan

I thought I would just post an update as this initial deal eventually worked in my favor. I know overall this is a riskier investment but I know that I want to try to invest in basically every asset class to start so it did not matter to me which order I would find them in. But basically after several negotiations I was able to get an accepted offer down to $179,500 which is down from the initial $225K listing (definitely overpriced to begin with). I also realized that the rents were undermarket as 2/4 units renting at $650 and other two were $550 with those leases ending soon. I also found that the estimated rehab costs ended up being less after inspections. So in the end a conservative pro forma would produce a CoC at about 15% with about $800 in cash flow with Property Management in place. So at this point I am closing in less than two weeks and we will see how my first property performs. I will keep everyone posted on my progress as we move along. Thanks for everyone's feedback as it truly was very helpful in this process.

@Drew Kimminau

I actually grew up in St. Louis and my parents started investing in REI about 25-30 years ago. They sold basically most of everything but at their prime they self managed about 250 units on their own with no PM in place. It was not until recently now that I am studying real estate investing that I understand what a huge success they were. I do agree with you that I should not be afraid to throw out MANY lower offers. It is a numbers game right...

@Jake Riordan 

We should definitely connect as I am still starting out and looking to build my KC network. I just started looking about one month ago. I was mostly looking at SFR until a few small multifamilies popped up. I was also intrigued by this property because the rental comps was about 655-695 and one of the units is currently renting for $650 and the other 3 unit I feel you could raise the rent to match and this would make the numbers much more favorable. I also feel like expenses could drop just slightly as well. Nonetheless I want to continue my search.

Thanks for everyones input so far.  

@Craig Harrah are you basically saying you are finding SFH in similar neighborhoods with less cash needed for investment but same CoC ROI? In your experience with this specific property what purchase price would you feel comfortable for this to make it a worthwhile offer in today's market? Thanks for your help.

Thank you @Drew Kimminau for your response.  What I have found challenging so far is communicating with other current ACTIVE investors.  I have gotten much advice from other investors who have done RE in past but their information is not current with today's market.  

I would tend to agree with you that the ROI may not be high enough in regards to this specific neighborhood. Can I ask what your specific criteria you are using for either single family home or multi family.

I feel like the criteria that I have been reading about is often times getting my laughed out of transactions. Some sellers are even getting offended by these type of offers. II was attempting to start with an offer of about 80% of ARV minus repair costs. Have you found these type of numbers to be too aggressive for buy and holds?

First of all, I am a newbie RE Investor and just starting out on BP and enjoying reading all of the helpful posts.  I want to be a helpful contributor eventually but you have to start somewhere.  I have read a few recommended books, viewed several podcasts and went through many forum posts trying to help me find and analyze deals but I believe with the ever changing market that some information may be dated already so please forgive me for asking similar questions that have already been covered.   I am looking at a property in Kansas City in what I believe is in a C Class neighborhood.  Here are the numbers for a 4plex in Raytown MO (Suburb of KC).

Purchase price: 200K

Repair/Rehab Costs: 10K 

ARV: 210K

Financing with 25% down at 4.5% for 30 years (150K Loan)

Total Cash needed $65,806 (Down payment+Rehab+ClosingCosts)

Monthly Income $2375, Monthly Expenses $1939.86 with NOI $14342.00

Expenses (Vacancy 7%, CapEx 5%, PM 8%, Tax 6%, Repairs 11%, Insurance 7%, Snow/lawn 6%)

Cash Flow $435.14

CoC: 7.93%, Pro Forma Cap: 6.83%, Purchase Cap 7.17%

All numbers were taken from BP calculator and my estimates are based off of last years figures because the apt is fully tenanted.

My concern is the CoC and Cap rate seem low for a C Neighborhood and my initial cash outlay also seems high. I am hoping you all may be able to shed some light on KC market currently to see if this deal is worthwhile or too risky and should pass.

Thanks for everyone's help and I look forward to many future deals!