All Forum Posts by: Andrew O.

What would you do with the $70,000?

I'm moving into J Scott's house...

$100k, pure cash deal? I would be looking to gross at least $1600. So I would be looking to cash flow $800 a month on an all cash $100k (50% for expenses) but would look to lower expenses.

Basically I know I can get at least 10% on my money, so I would want $800 at least a month, whichever way you use it.

Andrew

P.s this is a simplified answer.

No need to get snippy. You asked for opinions, they were given, you can take them on board or not. I'd much rather have my analysis prevent me from doing a deal, then charging ahead and doing the wrong deal.

Edit: it looks like you are looking to pay at least $20/sqft more than the market is getting. E Bakersfield should be better than gross rents 1% of purchase price.

5 units will be a commercial loan as far as I know, regardless of you being owner occupier, so you are looking at 20%+ down payment and a higher mortgage rate.

Living there will help you mitigate some expenses, but as you point out, you may be trading quality of life.

Make sure you really do your due diligence on the numbers AND property itself.

Andrew

Insurance, property tax, vacancy, legal (evictions etc), accounting, maintenance, capital repairs, property management, getting an apartment rent ready (change of tenants), are just a few of the expenses you will come up against. You have accounted for 2 of them.

How old is the roof, water heaters, AC units? How is the exterior looking? As I mentioned before you are only factoring in 1% vacancy, in Bakersfield...? How old is the plumbing and wiring?

Are you going to manage it and do the required works on it? You will save by working for free.

It's not like the idea of 50% expenses was just made up...

The property is 80 years old. Has it had the appropriate upgrades done to it to continue functioning basically maintenance free (as per the expenses). Roof, AC units, plumbing, flooring, paint, exterior etc, these things take money to maintain/replace. Are you going to manage it yourself? I hope you work for free.

The community here generally allows for 50% of gross rents for expenses, these are a reality over the life of a rental. So after expenses you would have $1280 to service your debt, you may break even.

Andrew

Oh ok, wow. Kind of seems like a really difficult way to make a couple of dollars. Why did you need a cash buyer in particular? Do you classify what you are attempting to do as wholesaling?

I'm not a wholesaler so I am probably not understanding the spread you are seeing, but I am with John with seeking 70% or ARV if there is minimal fixing. You are close to 85% without a real idea of issues, and have expenses on selling end.

Please tell me you mean your buyers agent. If you are not allowed an inspection period, as was alluded to, you need to have your own agent giving you a run down of the property, not the person trying to sell it!

Vacancy of 1 month every 8 years? I'll take it! As Steve said, you need to do your due diligence on their numbers, and the building. The fact that their expenses seem to be limited to taxes and insurance will show on the state of (dis)repair of the building.

Andrew