All Forum Posts by: Nick Romano

@Chris Williams are you saying 5-10% for Maintenance AND 5-10% for CapEx?

or

Total 5-10% combined?

@Tony Castronovo Thanks for the input. You're right on the Maintenance, CapEx and property management. I'll be managing myself but what would you think is a fair maintenance and CapEx budget? I'm planning on doing about $325/month so about $975 per unit per year.

Hey guys- SHOULD I BUY THIS PROPERTY??  Thanks so much for the input.

I have a property that is an ideal area.  Rents are going up and rental market is super hot. Currently rent is well below market. 

Cash flow looks pretty good (about 900/month) but the Cap Rate seems low.

Cap rate: 6%

$59,160 (rent)-$6,800(taxes)- $2,150(ins)- $2,600(Water)- 2001.00(ins) /$770,000(purch price)= 6% CAP RATE (let me know if this calc is off)

Cash Flow: $925.76 per month (calculation below)

 Property: FOURPLEX-8 bedroom, 4 bath. This units has 4- Two (2) bedroom and One (1) bath per unit.

Neighborhood: Zipcode- 02171. Absolute lowest 2 bedroom on the market in this neighborhood is $1500. 

-Current tenant situation- I will inherit these tenants and raise all rent. They have never been late on rent. I'm told they will all stick around for at least a few years. The condo needs a little work and could use updated bathrooms and kitchens. The plan is to gradually raise rent to market value, when the tenants move out I will renovate each unit one by one.

Unit 1: Current $1,180 Will go to $1250 when I buy.- 4 year tenant

Unit 2: Current $1,130 Will go to $1230 when I buy.- 15 year tenant

Unit 3: Current $1,120 Will go to $1220 when I buy.- 6 year tenant

Unit 4: Current $1,130 Will go to $1230 when I buy.- 5 year tenant

-Utilities: All tenants pay their own utilities (Gas, oil, heat...not water)

-Water Bill: $650/Quarterly- Paid by owner (me)- $2600/yr

-Taxes: $1700/Quarterly- $6800/yr

-Home Insurance: $2150/year

-Flood insurance (needed): $2001/year

-New roof 2013

-New hot water heaters

-New electrical

-Mortgage info:

-Purchase price: $770,000 

-20% down: $154,000

-30 year fixed @ 3.708% (**Current level)

-Total mortgage payment (including taxes, ins, etc)= $4,004.24/Month

-Total income from rent= $4,930.00

-Cash flow: $925.76/month 

Benjamin are you planning on moving to Boston?  

Wow you guys are great thanks for the help.  The most obvious question is about the rents being $1200 when I could be getting closer to $1600.  

The reason for not jacking it up through he roof right away is because I'm nervous about losing the good paying, quiet, polite tenants currently in the building.  After having the property for a year or two I was planning on slowly raising the rent each year.  If they don't want to stay, I would do a small renovation then re-rent closer to the $1600/month.  

Do you think I should be weary of these long term tenants going up in arms when I raise the rents?  How about future rent hikes?  Do you think the tenants would become upset and not pay....not move out...??

Thanks!

Wow thank you so much Oren for the help.  This community is amazing.  I'd love to continue the discussion:

- Maintenance budget and Cap Reserve will be reserved at about $300 per unit per year.  The inspection will detail the longevity of the systems but I am assuming judging by first walk through that the units will not need any large immediate update for foreseeable future.

-When a tenant leaves, the funds to renovate the unit will be coming from the accumulated cash flow.  If the tenant leaves more quickly than I expect, I do have the funds to renovate the unit but I would most likely rent the unit as-is if needed.  Thinking I could probably get $1300-$1350 very quickly with the rental market in this neighborhood.

-I'd like to leave the rent at $1200/unit because I want to get the property cash flowing positive and get some reserves before I scare away the existing tenants.  They all pay on time and have been great tenants.  I'm told that can be a tough process to go through.  If a tenant does leave they could be replaced....but I'd like to have some cash flowing in to get my confidence up.

-The plan is to stagger the rents.  So the leases would all end about 3 months apart from another making only one unit empty at a time for renovations.  This would minimize the vacancy during reno...The reno is more like a facelift for the bathroom/kitchens...not a full reno.

-Will look into closing costs, legal, accounting, etc.  My wife is a CPA and I have another business which we have very qualified CPAs working on.  

-Now for the Biggest part of the response.  You mentioned on an investment of $780k I would return $9.6k (1.2%).  But I'm putting down $156,000 (20%) so wouldn't my return on that $156k be more like 6.1%?  And this 6.1% would be in addition to tenants paying down my mortgage and building equity in the property.  If I put that $156k in the bank and got a return of 1.2% the return would be around $1,900.

Thanks so much for the help guys.  I'm very appreciative!!!  I owe you.

Hey BP Community.  Thanks you so much in advance for your help with this situation.  Its my first multi family....I've run the numbers, done the research, and this is my last step before making the plunge. See below all the numbers needed (I think) to make the decision to buy.

Property: FOURPLEX-8 bedroom, 4 bath.  This units has 4- Two (2) bedroom and One (1) bath per unit.

Neighborhood: Zipcode- 02171.  Absolute lowest 2 bedroom on the market in this neighborhood is $1600.  Please let me know if I'm wrong.

-Current tenant situation-  I will inherit these tenants and raise all rent to $1200/ea.  They have never been late on rent.  I'm told they will all stick around for at least a few years.  The condo needs a little work and could use updated bathrooms and kitchens.  The plan is to gradually raise rent to market value, when the tenants move out I will renovate each unit one by one.

Unit 1: Current $1,180 Will go to $1200 when I buy.- 4 year tenant

Unit 2: Current $1,130 Will go to $1200 when I buy.- 15 year tenant

Unit 3: Current $1,120 Will go to $1200 when I buy.- 6 year tenant

Unit 4: Current $1,130 Will go to $1200 when I buy.- 5 year tenant

-Utilities:  All tenants pay their own utilities (Gas, oil, heat...not water)

-Water Bill: $650/Quarterly- Paid by owner (me)

-Taxes: $1700/Quarterly 

-Home Insurance: $2150/year

-Flood insurance (needed): $1400/year

-New roof 2013

-New hot water heaters

-New electrical

-Mortgage info:  

-Purchase price: $780,000 ($260/sq ft)

-20% down: $156,000

-30 year fixed @ 3.708% (**Current level)

-Total mortgage payment (including taxes, ins, etc)= $3,955/Month

-Total income from rent= $4,800

-Cash flow: $805/month (@ $1200 rental per unit).  

-Full inspection and final offer scheduled for 11/9/2016

So that's what I got for now.  Any insight you guys could give would be incredibly appreciated.  Its my first deal and to be honest I'm scared.

Thanks so much!!! Looking forward to hearing your helpful replies.