All Forum Posts by: Nick Rose

@Kip Cline  No need for wifi, although it is nice to have so you can monitor your system and change on the fly.  No need for dampers - this is just a thermostat that has remote sensors.  It can take the average temp of whatever sensors you choose, or it can detect motion and use only the sensors that have occupancy.  It's been rock solid for me.  

If you wanted to monitor the energy use, and have full control - you could always purchase a device that uses a cellular signal and gives wifi.  They essentially give you a very small amount of data every month for free.  You just have to front the 50 dollars or so for the device.  My apartment had a poor signal, so it didn't work out for me.  

I highly recommend ecobee. WiFi is an option but not required. Install it in the basement, then add a passcode so tenants cannot change the programming. Buy 4 wireless remote sensors. The thermostat will only read the remote sensors, not the basement temp. It can also be setup to detect tenant occupancy so if no one is home, the hvac will save energy.

Finding a lender is possible at that price point. Just expect to pay a decent percent of the sale price in closing costs. The biggest issue you'll have is find a decent property in an area that isn't terrible. It's a balancing act and will require local boots on the ground to know the area well. On a possible note - if you do enough homework, you can find properties that will cash flow extremely well with bank financing.

@Mike Landry @Austin Fruechting

I've seen capex calculated both ways- some include property management, others omit it. Good point though, so If I assume best case and include management costs, and put in a more realistic cap rate of 6% - I calculate a net loss of -$2300/year. -1.68% ROI. This assumes a CRE 20% loan. This would be for a stabilized property.

Obviously, and value add property would look different.  Naturally, even the value adds are going for more and more.   Likely due to the low cap rates on stabilized market.   

@Mike Landry

Agreed - time and effort (and money) are precious and limited for many of us. I've been trying to find the best use of money time and money, and have been disappointed in what I find in CRE. I may have to continue with smaller 3-4 units. It's slow and will require closing on quite a few deals.(time)

*sigh*

@Kim Meredith Hampton  I agree with you that in order to find properties that are not in high risk areas, 5-7 caps are typical.  I was aggressive in my above example.  How is anyone making any money with multis?  Are they self managing and all cash?  With all cash the Roi would be so low, why bother?

Ok, I suppose it is possible - I'm just hoping to get some experienced investors' take! I do have capital that I'd like to put to use in an apartment building in the roughly 400K-700K range, however I can't seem to make the numbers give me a decent ROI. This very well may be mission impossible. I've run some numbers on several market rate deals, and below is roughly what I've seen:

Purchase price - 700K

Cap rate = 8%

NOI = 56K

I'd need a loan and property management.

Property management ~7800/year

Loan (5%, 20 year amort, 20% down) = 44.3K/year

Cash flow = 56,000-7800-44,300 = $3,900/year

This assumes NO capital expenses and assumes the current owner's maintenance numbers are spot on.  

How is everyone making this work for them? Perhaps others are finding 11%+ cap rates in good areas? 

I currently have a 4 unit and a SFH, however I'm looking for lenders that would consider multi unit homes that are in the 5-10 unit size range. Typically, these are small deals (75K-120K) with rental history. I can find a couple properties that work well on paper, however this size loan has appealed to the lenders I have contacted. I'd like to offer cash when I find a property, do some repairs, then refinance. However I want to make sure to have a lender lined up so I can get most of my cash out for the next buy. Properties located in Michigan.

No, you should put subflooring down first. The 1/2 cement board is for bathroom walls typically.

Currently seeking more properties to purchase for cash flow, I also have done a high level investigation into purchasing a business.  I put together two scenarios based on using 150K toward down payments.  One is purchasing an apartment complex, the other is purchasing a business.    So many details generalities, I know.  However, there just seems to be very little cash flow when having to pay a debt service with multi-units.  I can find higher flow properties, but they are always much smaller and commercial lenders seem to shy away from smaller deals.   Anyone experience is business acquisitions want to weigh in?  Maybe I'm way off base?

*****Apartment complex (150K investment):

600K purchase price, 150K down (25%). Assuming a generous 10% cap rate = 60K income/year.

Debt service payment (450K, 4.9% rate, 20 year amortization) = -35,340/year

Cash flow = 60,000 (NOI) – 35,340 (debt) = 24,660/year

ROI = 24,660/150,000 = 16.4%.

More realistically, if cap rate is 7%, then ROI = 4.4% after debt payment

*No appreciation or debt payoff included in calculations

*****Business purchase (150K investment):

300K purchase price, same 150K down (50% down).

Net cash flow = 100K** (This assumes a conservative 3x multiplier)

Debt service payment (150K, 6% rate, 5 year amortization) = 35,600

Cash flow = 100,000-35,600= 64,400/year

ROI = 64,400/150,000 = 43%

After 5 years, debt is paid and income = 100K. ROI = 66.6%

I'm hoping to get some input on a 6 unit multi. 

6 Units, 58K asking price

Gross monthly income = ~2500-2800, tenants pay gas and electric.

Separate HVAC, separate electric meters.  1 large water heater for all.  8 year old pitched roof.  Certified by City.

The property is in a decent area.  Incomes are not especially high in the area, but definitely not a war zone.  Medium sized town with plenty of property management companies.  The numbers look great, however I have some issues:

1.  The interior is expected for an older home.  Beautiful stained wood trim, wood floors and each unit has claw foot tubs.  Subpar windows and the big issue is the exterior siding is wood and has been extremely neglected.  Although they painted recently, there is a lot of rot and I can see some holes thru the wood siding.  This is a HUGE home and I'm afraid of what I would find underneath the siding.  

2. There are many furnaces, and I'm being told they are over 20 years old.

3.  The seller seems very aloof.  It took over a week for them to reply and they have no idea what the rents are.  They recently hired a management company 2-1/2 months ago.  I can determine market rents and what they are currently getting.  My issue is, he has no idea what the tenant qualifications are.  Told me via email "tenants are not rich...probably all have bad credit and work for min wage."

4.  The seller will finance with a 5 year balloon, however then what?   I could set aside money to pay it off or try to get bank financing after 5 years.  From what I have found thus far, not many commercial lenders care to finance such a small property.  I'm trying to make sure I have a sound exit plan.

Any input is appreciated.  I do have cash for this property however I'd rather leverage as much as possible when possible.  This is not my first rental, but it is my first multi.