All Forum Posts by: Nicole (Dunlap) Pendergrass

@Dion

Your post is extremely helpful…. Thanks a lot. Sorry about the confusion with numbers, let me clarify some things:

• $84,000 is gross effective income and does NOT include the vacancy
• Unit mix is 12 one bedrooms at $460 p/month and 4 studios at $375 p/month
• The average monthly cash flow is $504 net p/month total for all units – but that DOES include average vacancy of 26% (averaged from the last 10 months)
• The current vacancy for this month is 18.75% (3 units vacant) so the current total monthlycashflow is $1,010

As for the Expenses:

• The Operating Expenses given to me were $31,950 for the 10 months. Annualized that’s about $38,340.
• My budget’s expenses come in at around $56k for a few reasons:

1. Their management fees were way too low at about $3,400 annualized (they’ve only had PM for about 6 months but were managing it themselves prior). I estimated PM at about $8400 at 10%.
2. They didn’t have a line item for repairs and maintenance, so I estimated about $8,400 at 10%.
3. There were a couple of other smaller, misc line items I estimated but the two mentioned were the biggest ones.

I def need to speak with some lenders about this to see their parameters and what their valuation of the property to see what my refi could be. I do admit, there’s a lot more research that needs to be done, but if they accept an offer I can iron out those things and come back to the seller to renegotiate if something won’t work as we planned.

*note: had no idea having the seller refi and then be out of the deal would be considered fraud – good to know!

Not sure how much it was bought for... didn't ask. I'm going to ask around to some contacts from that area and see how I can find out (I'm sure there's an online website).

@David

Thanks for your advice! I had also considered MLO but I def have to confirm what kind of reserves they have. If they don't have any, I was thinking I could have them take out a really small debt service on the property (maybe $25k-$50k) that I could keep for reserves. This would come out of the balance of what they get whenever I refinance down the road... does that seem plausible?

Also, as far as them just filling the property with anyone... I'm pretty sure they didn't do that since the listing I saw says 75% occupancy, which is in line with the average vacancy amount I calculated. He also told me in multiple conversations that the OM was working on filling the vacant units but they aren't filled yet because he did not want to put just anyone in there; he wanted to make sure everyone was still screened correctly.

The PM is also working on implementing a system where the rent is deducted automatically from the debit card of any tenants that get government assistance (the money from the program is normally deposit on the debit card the same day of every month).

They just gave me the standard answer of we just want to get out of it and move on to something else. I do get the "feeling" that there's something they're not saying.... I know the area isn't the best (I'm guessing C or C-) and most of the tenants are on some type of government assistance (he said not section 8). But I feel like I could uncover anything I might be concerned about during the due diligence period.

Hi All,

I am currently writing an LOI on a 16 unit apt building but need some ideas on creatively structuring the deal. I want to give the seller about 3 offer options and he can pick the one that fits his needs best. Any input from people really good with numbers would be great!

Background:

Only 10 months worth of income and expenses are avail bc the owner just purchased the building at that point and didn't have previous year's info. So I averaged the monthly income and expenses and x12. There is no debt service - it's free and clear. The owner has managing the property himself for a while, but recently hired a property management company w/in the last few months. Vacancy has been really all over the place those 10 months, but last I heard there were 3 units vacant (18.75% vacancy) that the PM was working on filling. The avg vacancy for the past 10 months is 26%.

Financials

Gross Rental Income: $84,000

Operating Expenses (including extra I've added for cushion): $56, 000

Asking: $250,000

But at that price, I would be in the negative at 26% vacant (assuming traditional bank financing at 20% down - which no bank will finance a negative building anyways). Even if I got the property fully occupied and averaged 10% vacancy for cushion, I would only cashflow about $400 p/month. Also, even with no debt service, the building currently only cashflows $500-$550 p/month at 26% vacancy. I keep harping on the vacancy because I know it would be smart for me to purchase based on the past year's performance (even if I know it's bc the owner didn't know how to manage!) and not just the last month or two.

The owner is very motivated and I'm looking for a way to structure multiple offers where I can:

1) take over control the building with maybe them being an equity partner ( giving them a % of the monthly cashflow and % of back end sales),

2) maybe put an initial purchase price of something small upfront like $80k (is it reasonable to think I can bank finance the $80k w/20% down? If not I am prepared to raise the $80k) and then they get the balance of whatever purchase price we agree on in a year or two? I'm assuming once I establish a history of the property performing I could refi to pay them their equity... does anyone know how much history a bank likes to see?

3) also considered forming an entity where we are both members and have them refi for the purchase price, give them their equity and then removing them from the entity

I asked about seller financing as another option and they are willing with about 50% down... but that is too much. Of course if I could convince them to get me into the deal with no real money down that would be great (no need to beat me up about "no money down" deals, I know they're rare).

Sorry I know this ended up being looooong and all over the place, but if you can understand what I'm trying to say please comment :-)

Thanks Brian and Dev. I think I will just be a little more stern with the cash offer and the deadline to accept it... I def need to work on my negotiation skills, I think I tend to be too lax/polite :-/

Brian - youre script is very helpful :-)

*also, neither unit pays any rent since the reverse mortgage requires no monthly payments, and I'm pretty sure the step mom will just lose rights to live in the house if it forecloses

Need help on a probate lead that called from our direct mail campaign:

The property was in probate about a year - the will was contested so the executors (2 brothers) just got full posession of the property in March. There's a reverse mortgage of $160k and the lender just started foreclosure proceedings since the loan provider has already given about a year grace period - the loan was technically due last year when the owner passed. It's a 2 family and one brother lives in a unit and the step-mother lives in the other unit (step mother is the one who contested the will). The brothers are resistant to accepting our cash offer of $220k 1)bc their parents owned the house for 30+ years and they dont want to "give" it away and 2) they have to split the proceeds with the step-mother 3) the brother needs some more time to move out - find another place, etc.
The Property is worth about $400k.

Just to help them come up with other options, I discussed them doing a re-fi to pay off the reverse mortgage and that would stop the foreclosure plus give them time for the brother to move and to sell for a closer to market price. They explored this option but apparently the step mom has to approve a new mortgage/refi bc she's named as a permanant resident/tenant on the will.

WHEW! Got all that???

Anyone out there have ideas other than our cash offer or a re-fi that could help them??? We discussed owner financing options and I think he will be open to that if it gets him a higher price... Any ideas on how to structure an owner financing option?

I was thinking pay enough cash to pay off the reverse mortgage and the balance of the purchase price have the owner hold the note.... but how much should I offer in this scenario???

Thanks for any input and help!

Hi everyone,
Myself and 2 other people were supposed to be leaving tomorrow afternoon/evening (time negotiable) from NYC to drive to Hyannis, MA (not far from Boston) for this great real estate/business networking event hosted by Dave Lindhal, a multifamily/apartment master. There was a situation with the hotel booking not going through and the hotel never notified anyone. So at this point one person is no longer going so we are looking for 1-2 more females who would like to go to this event and split costs (you would only have to pay $50 for registration and then split hotel/gas.... that's it!). So sorry this is last minute, we're in a bind and this will be a great event you don't want to miss (neither do I)!
http://www.the2012gathering.com/

Please email me ASAP if you would like to go, we need to decide by tonight if we can still go and to try and get a refund for the cost of the seminar… [REMOVED] or text me [REMOVED]

Hi All!
I've been researching what the typical ball park percentage would be for closing costs in NYC. I've found a few resources that itemize what the expenses involve are, but not really price wise. I've even seen a little less than 3% of purchase price cited, but it didn't say if that was buyers costs or sellers costs or if that included the loan costs.

I'm a wholesaler and plan on assigning my contracts in most cases, but for those circumstances where I need to double close, I'd like a rough estimate of what the closing costs might be so I can adjust my offer accordingly.

I'm really looking for this kind of breakdown (if anyone is able to provide any piece of this it would be highly appreciated!):
-Approx sellers closing costs %
-Approx buyers closing costs % (w/o loan costs as if I was paying cash)
-Approx Loan costs %

(I'm not looking for Realtors commissions to be included above since I know that's 6% and can be negotiated/split btwn buyer and seller, etc)

Thanks!
Nicole

Hi All!
I would also be interested in contact info for RE lawyers in NYC. Alex, if you don't mind forwarding me the one's you've gotten and I also have a lawyer and contractor I can give you... let me know!

Thanks,
Nicole