All Forum Posts by: Milind Shastri

@Milind Shastri Best way to get them under contract is to overpay.

But seriously, there are relatively few 2-4 units properties in DFW, and it is very rare that you will find one that cash flows. 

Hello Milind 

I am Fairly new in Real Estate - mostly flipping, so you can take what I have to say with a grain of salt, but have you asked yourself the question, why would someone walk away from something that has such good cash flow. Does this person have back up for this 40 k NOI, From a PM standpoint, if I were a PM and you were asking me to manage a property (this property) that was like a war zone, I would be charging you a premium to manage these property's ,if you can find someone at all.

What about finding contractors to do the work on those properties. As a contractor myself I can tell you that it will not be easy for you to find good contractors to do the work you need done on those properties if you choose to take on this project, what about insurance, etc. You will pay a premium for everything you want to do on this property for all the wrong reasons. 

I don't mean to sound like a pessimist but if you get a hard money lender involved and you need to get repairs done you will be hiring a GC to coordinate the repair work, a good one will get the repairs done in time and within budget, a bad one can force you to go over budget, cause delays, etc.  You may want to look for a hard money lender who could be flexible on their terms.

Anyways,

Good luck with whatever you choose to do.  

@Milind Shastri I don't know of any *reliable* way to find a cap rate. If I was in your shoes I'd ask a few commerical brokers in your area. Maybe head to an REI meeting in your area. You'll get a variety of opinions but odds are you won't have on person saying 5-cap and another saying 10-cap. Others may have better ways. I do, however, lend a little less emphasis on cap-rate than others. It puts a 1917 property in the same block as a 2017 build. I have a hard time treating those two properties as equivocal.

Milind Shastri I don't know Baytown at all, never been there, but based on what you're saying it sounds like a "D" neighborhood. I'm guessing that after putting $100K into it (the lower side of your estimate) you'd still get the same rents. Why? Who would want to pay more to live in that neighborhood? They'd just pay the same raised-rent to live 1/2 mile away in a better area. Not to mention that when the seller says anything about an ARV value, take it for the grain or salt that it is. If the owner thought that putting $100K into rehab he could get $300K more on the sale price (netting $200K) he would do it.

The scary part is that I could be right...or wrong. You could be right...or wrong. Other people chiming in could be right...or wrong. Here's the salient point: it's your first time so if you can get approved you'd better believe it will be a full-recourse loan. Which means, if you're wrong you don't just lose your original investment, you're on the hook for entirety of the loan.

Anyway, not advocating a "yes" or "no" just tossing out some perspective.

Hate to sound like a negative Nancy, but if you are a first time investor, its a very big project for you to take on. Who is going to manage these properties. You will have to find a really good PM and then able to manage the PM. 

If you want to get involved in this, I would suggest a JV of some kind with a seasoned investor. Also, need to ask if these are Section 8 or just regular tenants?

Uh. How did you arrive at your numbers? "current NOI is ~40k. After repair NOI ~60k. (great cash flow!)" Based on.... your expert analysis? The owner's tax returns? What?

Just curious if you reviewed the leases and determined what your default rates are. And the property is managed by... a licensed broker? The owner?

Way, way too many red flags on this, IMO. 5 hours away...  Holy cow, man.