All Forum Posts by: Omi C.

Thanks everyone. 

@Drew Schade good luck in 2015. I use Google Docs too. This way I can access/use my analysis sheet from anywhere.

@Troy Fisher a beer sounds great!

@Kirk R. The seller wanted to close in 2014 for tax reasons. I offered a fast close in exchange for a discount. Why would closing costs have been better in 2015?

@Gordon Cuffe You can see some of the details in this deal analysis thread.

Just to follow up on this thread. Closed on this property yesterday! Thank you all for the insights, advice, and encouragement!

My first success story!

I'm happy to report that I have met my real estate goal for 2014 to get started and buy something! I just closed on a 4-plex which should give me about 15% cash on cash returns, and will cash flow about $500 per month.

Its been a year long journey to get to this point, and I wasn't sure I was going to make it!

At the beginning of 2014 I set goals to educate myself, find a market, establish a team, and buy my first property. After reading the Millionaire Real Estate Invester I was convinced that MFH buy and hold was what I wanted to do. I started out determined to invest locally in state in California since I was new to every aspect of this business. I also made my own property analysis spreadsheet and decided that I wouldn't invest in anything that didn't give me over at least 12% cash on cash returns. Although I found some markets and deals in California which would cashflow, nothing really met my financial criteria. By October - still property-less - I began to question my strategy and criteria. After all, a strategy which isn't resulting in any investments, isn't much of a strategy at all. I was certain that I didn't want to lower my cash return requirements. So although it terrified me, I decided that I would start looking out of state.

It was around this time that Jays investment summit happened in San Francisco. I met many out of state investors, and started understanding how to mitigate some of the risks of out of state investing. I connected with @William Robison there and after the summit we started talking about investing in Kansas City. After some searching, we found a deal, I vetted the numbers with the incredibly helpful folks in the Deal Analysis forum, and closed on 12/31!

As of today, I'm a landlord! Time for my analysis spreadsheet to meet reality. *gulp*

I am deeply grateful for the community here on BP. I certainly would not have made it to this point without you guys. So, thanks @Joshua Dorkin  and  @Brandon Turner  for making this place awesome - especially for noobs like me.

Thanks to my local buddy @Troy Fisher for the early and continuous encouragement to get started.

Finally, thanks to @J. Martin for his advice, inspiration, and for creating many networking opportunities for investors in the area, especially the *annual* :-) summit in SF.

I'm ready for you 2015! :-)

@Troy Fisher  Thanks for looking at this. You're totally right - I am underestimating some of the turnover costs. Shane raised a similar point. I'll adjust my numbers to include PM fees on turnover (75% of rent) for 2 units every year. So thats 3.5 unit rents per year.

From talking to a couple of lenders, my rate will be closer to 4.5%.

After both these changes the CCR for year 1 is 14%, which is still ok for me.

Wow thanks for all the advice everyone - this is awesome!

@Isaac Essex  - 1.5% would have been nice! I think if I was getting a property which needed some rehab, I'd be able to achieve that. This is my first property so I'm trying to reduce some of the unknowns. Like you say, it still seems like a good deal.

@Sam McPeek - according to padmapper and rentometer the rents are about average. This is a suburb of a big city, and the rent is what it is. 

@Mike H. - I actually couldn't find comps for this property. The offer was lower than list, and the numbers made sense, so I figured it was worth a closer look.

@JT Spangler  - 230k in Santa Cruz gets you the cupboard under the stairs and bathroom priviledges on nights and weekends. :-(

@Shane Pearlman    - ahoy neighbor. Yes it does snow there. Regular snow removal is part of the maintenance estimate I have. Didn't think about turnover costs from the PM, will add that to my model. Thanks! Will send you my spreadsheet in email.

@Brad M.    - thanks for the encouragement. 

@Steve Vaughan   - $230k is the offer price, which is less than list.

@Kyle Evans  - thanks for taking a look!

@Aaron Montague - Understood. My current numbers have me reserving $300 (10% of rent) for Capex, so I think that should have be covered. I just saw the seller disclosures, and the roof is 5 yrs old, but all the HVAC systems are original. So this cash might get spent before the cashflow comes in. *gulp*? I have reserves though, so I should be ok in the long run.

Thanks again, all!

Thanks for taking a look @Aaron Montague !

Yes, tenants are currently paying all their own utilities. I've presumed that means that they are separately metered, but I'll ask.

Yes, this is a single building with a big roof. Each unit is 2 stories. Is the $150/month/roof in addition to the 10% capex?

Hi everyone,

I'm considering making an offer on my first property. I'd love to get the advice and wisdom of the BP community on this deal. What have I missed??

The property is a 4-plex in a nice family/community oriented suburb. Each unit is a 3/2 with a garage. Schools are above average. Crime is non-existent (1 theft in the last 30 days, summer was the same). Building was built in 1990. The property is fully rented at present.

Here are the numbers:

Purchase Price: $230,000

Down payment, 25%: $57,500

Loan amount: $172,500.00

Loan payment (conventional, 5%, 30 yr): $926.02

Monthly rent: $3100.00

Monthly costs (see below): $1,456.50

Monthly NOI: $1,643.50

Monthly Cash flow: $717.48

Yearly CCR: 14.97%

The monthly costs include:

5% vacancy

10% Maintenance

10% Capex

9% Property Management

~1.5% Property taxes

~0.6% Insurance

I normally would put vacancy at 10%, however the tenants in the area seem to stick around for a while and it seems unrealistic to assume that every unit will turn over every year. 5% to me means that I am planning on 2 units turning over every year, and that it won't take longer than a month to fill those units again.

I am also expecting the 20% of Maintenance+Capex to cover turnover costs. It seems reasonable for a newer building like this, but I'm not sure?

These numbers are my best shot at "worst case within reason", and 15% CCR seems like a pretty good worst case.

What do you gals and guys think?

Omi

Just heard this show on NPR about the effects of gentrification on a neighborhood. Although the show is about a specific neighborhood in Los Angeles, the issues they discuss are relevant anywhere. Lots of really interesting details on gentrification, the effect of hipsters moving in, what all of that even means(??), and its impact on real estate (and other things) in this neighborhood.

Figured other folks here would find it interesting too. There is even a blog of the analysis being done available here:

@Danny Duran and @Chris Clothier - we were talking this over dinner that night in SF.

http://yorkandfig.com/

Omi

I'm in! Thanks for setting it up Shane!

Ditto the inspiring comment. Congrats J. Very cool instance of turning someone elses problem into an opportunity.