All Forum Posts by: Nick B.

It's as "apples to oranges" as it gets! You cannot cherry-pick a single MFA investment and compare it with a basket of 5000+ stocks. You need to have statistically comparable baskets.

E.g. 500 MFAs over 50 states vs. S&P 500. Otherwise, anything can be proven or disproven with this kind of comparison.

The only variable out of the three you mentioned that can be expressed in percents is vacancy.

The other two (capex and repairs) must be budgeted in dollars. They do not depend on rents and that's why it makes no sense to use percentage of rent to estimate them.

You may put something like $1 for the down-payment and you'll have some astronomical ROI percentage :-)

However, percentages don't pay bills, dollars do. So, focus more on the dollar amounts you're making and see if these amounts satisfy you. 

INF% means "infinite return". When you refinance and take out more than you put in initially, your initial equity goes below zero. The calculator, however, stops at zero and uses it as your initial investment. When you divide whatever cashflow on zero equity you get infinite return.

corporationwiki.com is a good one

Are you accredited or sophisticated investor? Based on your question, I suspect that you are neither. If that's the case it's better for you hold on to your money until you educate yourself enough to at least tell a good deal from a bad one.

But ever after that, $20K won't get you far as you're looking to get 13-16% ROI. In absolute dollars it is just $2600-3200/year. Less than half of it would come from distributions and the rest is only paid to you when the property is sold in something like 5 years.

Best way to estimate taxes in Texas is to get a last year tax bill (public data) and then apply all tax rates from that bill to the assumed property value. A quick way is to use 2.5% as the tax rate. 

 Equity Residential. Google "Sam Zell" and you'll get the whole picture :-) 

Based on the unit count, $145K is enough (may be even more than enough). However, $800K renovation (less than $8K/unit) may not be enough if the property is in really bad shape. Also, there is no such thing as "norm in Houston" (or "norm in any other MSA"). Houston is huge. You need to get information about particular area where that property is located. While you at that, look also at income and crime statistics there.

On RUBs and rents: average rent in this place is $880/mo. The proposed utility bill is $107/mo. That's an equivalent of $107 rent increase. Does the local submarket have rents of $987 or higher for "all-bills-paid" properties? 

@Kat N.

I don't see much of the value-add here with NOI increase depending mostly on the expense reduction. If expenses stay the same or increase (and some of them will!) this project is doomed. I don't think there will be another buyer down the road willing to pay 1.7% cap rate.

A good value-add deal has rents way below market ($250+) and that drives the NOI increase. Shifting utilities to tenants may help but only if all other properties in the area do that. If most other apartments are "all-bills-paid", it would be difficult to change that on a single property in the neighborhood.

You did not mention unit count and without it it is difficult to say if $145K in payroll is enough.