All Forum Posts by: Matthew John

@Michinori Kaneko I'm glad we came up with the right numbers and I was in the Ball Park of a decent offer. There is value that could be added, could probably add $300 - $500/m and reduce the expenses, but this guy is delusional. 

He bought them at the bottom of the market and thinks this property is now worth 400k+ because of the location. It's next to a big empty lot on a busier road and he thinks it's going to be commercial which will boost the price of the property. 

It's hard to reason with sellers like this. I explained my offer with Math and he is just throwing out random numbers. 

Called owner to offer 130k. He said he wouldn't sell for under 400k.

Welp...Onto the next one! 

People are crazy in this market!

@Michinori Kaneko Yeah gave me the rent for all individual units and what expenses he pays. 

All the units are rented out right now for $3845/m. Landlord pays Water for all units + Gas/Electric for the Triplex (roughly $580/m just in utilities).

When calculating NOI, I have accounted for the utilities he's paying + 40% in expenses from Vacancy/Repairs/Management/Capex. Since the Duplex and Triplex are each on different lots, they each have their own taxes which is nearly $7000 for both buildings.

According to Income vs Expenses, this property will barely cash flow after all the expenses no matter what price I pay. Just sounds a bit off. 

@Michinori Kaneko I find this a lot with these off market properties. With 5 tenants in there, he doesn't want people disturbing them without knowing we're on the same page. 

I'd hate to be the guy that he has to arrange times to clear out the tenants and then I offer him 80k and he's expecting 150k. I'm sure it happens all the time...

I think the inspection is the route to go, just unsure how much negotiating power I'll have after an inspection. 

I'd think average cap rate for this type would be 10-12% and that's near my ARV of 230k.

NOI is around 22k when factoring in Vacancy, Taxes, Repairs, Management, Insurance, and Water.

If I factor in Electric + Gas for the Triplex (which he's currently paying), my NOI drops to 18k. After setting aside money for Capex & Mortgage, it's only netting a few hundred per year...

I know a Triplex by itself in this area would go for ~130k and a Duplex ~100k. 

I am thinking of calling him and telling him I can offer 130k. This gives me about ~30k to work with in repairs and I can inspect the inside units to determine what they need. This also gives the seller about 95% profit over the last 10 years so I certainly hope he's not insulted by my offer. 

Hey guys, 

Over the past week, I've been going back and forth with an Owner I found through my Direct Mail Campaign. 

He's an older, retired guy and it seems like Landlording is taking a toll on him. He told me he's 75 and sounded very grumpy. Today he said he was going to court with a tenant and starting the eviction process. It's no surprise he responded to my letter!

He owns a Duplex and Triplex right next to each other. Their taxes are separated by the city, but total it is 5 units. 

He's owned these properties since 2009, purchasing them both for a total of $67k. 

He refuses to name the price he's looking for. Not even a ball park. He wants me to make the first move. 

ARV is a conservative 230k if sold individually, but unsure together because there are not any other 5 unit sales in the area to go off of.

All the units are rented out right now for $3845/m. Landlord pays Water for all units + Gas/Electric for the Triplex (roughly $580/m just in utilities). 

He's owned the property for 10 years and claims to have kept it up to date, but I won't be able to get inside without him accepting my offer. 

I've only done residential up until this point, but I'm curious if this would qualify as a commercial deal?

I talked to my Mortgage Broker and he said they could break it up into 2 residential loans, but then we will be paying closing costs twice. 

The seller made it clear he wants to sell both together & I would want to buy both, but I'm unsure if I should seek a Commercial Loan for this or a Residential. 

I'm also unsure what offer to propose to the seller without offending him and telling me to kick rocks, but I also need to give myself enough cushion incase it needs a lot more work on the inside than what he's telling me. 

I feel like if I offer 150k and find out it needs more repairs, it will be much more difficult to talk him down. At the same time I think 120k would be borderline insulting since other Triplexes in the area have sold for 120k+ (although I'm not sure if he's aware of comps). 

Thanks in Advance for any responses!

@Robert Leonard Totally worth it! This is my primary for now. My tenants at the other properties easily cover this monthly payment. 

Next step is to finish improvements when it stops snowing and get that HELOC to buy more rentals!

@Jaiden Olsen Thanks for this! I had no idea I could do this without getting an Appraisal. 

I just called Chase and they said they will send me a form to fill out. Costs $105 to get a BPO (which they encouraged over an Appraisal) and takes a few weeks to get it sorted. They said if you've made significant improvements and the amount you owe is at least 80% of the current value, then they will remove it!

If this goes through it will drop my monthly payment to $474 from $518. Not a ton, but if I can save $44/m for the next 10 years it's over $5000 I'm saving! 

@Dominique Stevens Hey are you looking in the city proper or suburbs? There are 3 big counties surrounding Detroit - Macomb, Oakland, and Wayne. 

Wayne County = Detroit. Macomb/Oakland = suburbs. 

Many brokers either work in 1 or the other. If you're looking in Macomb/Oakland, I might be able to give you some recommendations. If you're looking in the city, it might be harder. 

@Greg Dickerson When calculating NOI on a Triple Net property like this, do you still factor in Taxes, Insurance, & Repairs even though it's possible the tenant pays for it?

Just removing these expenses could add an additional 15-20k to the NOI and turns a decent deal into what could be a great deal.

@Jeremiah Green I had a similar problem when I started. I brought on a credit partner (someone that shows income + good credit). This will be someone that can co-sign a loan with you or carry the loan in their name. 

Start with friends and family. If they are hesitant, you could also offer to give them money or give them some equity. 

I've bought all my properties using a credit partner because I don't have stable W2 income & that's what the banks want.