All Forum Posts by: Paul Lachaud

I've walked the surrounding blocks and spoke to neighbors. The area is relatively well kept.

None of the tenants are section 8. There was another property two blocks over that is a 4 unit. It had government assisted housing tenants. The units were $550 - $600

This is located in Bond Hill. 

With regard to long term rent growth, how do you approach the analysis? I simply looked at the range ($500 - $650) of the current rents in the area and set it somewhere in the middle ($575). So it's a very static view.

I'll crunch the numbers at $500 per unit rent, which would still be a 14% rent increase.

Do you recommend I do cash flow analysis over time (discounted cash flows)? I could estimate appreciation based on historic sale prices, I just wasn't banking on it. I've read that rents rise with appreciation.

Thanks, 

Paul

Hey Everyone,

Been analyzing a series of deals during the last 2 weeks and I keep coming back to this one. The current owner retired and has moved to a different state. He's tired of coming back to manage his properties, thus he's selling all of them.

All units are the same and there is a detached 3 car garage.

4 unit, 1 bedroom, 1 bathroom each. The current rents are $437.5 per unit which is below market rate of $500 - $650. All units are filled and they pay month-to-month. I plan to increase rents to $575 giving the tenants a 60 day notice.

And here is operating expenses and debt service. Assuming 5% Vacancy, 15% CapEx, 15% Repairs, and 11% property management (I plan the manage it)

Here are the details of the mortgage (currently pre-approved for an FHA loan, but I may likely will use a conventional loan with PMI instead, to avoid the lifetime mortgage insurance. I've calculated with 5% down it would take about 9 years to remove PMI, less time if I redirect cashflow to pay down the mortgage)

Here is the cash flow:

And return:

I'm concerned that I may have miscalculated something because the cash-on-cash return seems so large. Cash Spent is the sum of my down payment and closing costs. Cash on cash return was calculated as Yearly Cash Flow/Cash Spent. It doesn't meet the rule of thumb of $100 per unit, per door when I include PM fees.

The picture looks even better if I increase the rents to $600

I expect some CapEx spent in the next few years as the roof was replaced in 2004. The electric wiring and furnace were updated in 1994.

Crime rates in area are low, elementary school & middle school are average. The high school is below average. The current owner rents to older folks who don't have children. I'm still deciding if I'm comfortable with inheriting tenants. The owner and agent has communicated to them that there would likely be rent hikes under new management. They've all lived there 5-12 years. 

Thoughts on the deal? Am I missing some key factors?

Thanks,

Paul

Wow everyone, thank you for being so welcoming. I look forward to becoming active in this community.

@Jay J.: I've read through the basics link and the ultimate beginners guide. I've listened to about 20 episodes of the podcast, really a wealth of knowledge to consume. It's like drinking from a water hose. Thanks!

@Mark Nolan: Currently about halfway through "The Book on Investing in Real Estate with No (and low) Money Down". Thanks for the link, I'll likely get the book on rental properties next.

@Dmitriy Fomichenko: Thanks, I'll try to connect with local members. I've set a few alerts for Cincinnati keywords.

@Phil Ting: Great! Have you already purchased or still evaluating?

@Jered Sturm: Great to meet you, I'd love to talk to you about your experiences thus far.

Hello BP,

I am new to biggerpockets and real estate investing in general, been listening to the podcast and reading quite a bit during the last month. I'd like to get into buying & holding 3-4 unit multi-family rental properties. I've looked at a handful of properties during the last week and may be on the verge of making my first offer. You'll likely see a post in analysis pretty soon.

Look forward to connecting with you all.

Thanks,

Paul