All Forum Posts by: Philip Bashaw

Hello, 

I am interested in learning from a seasoned house flipper and developing a relationship. I propose doing 10 deals together on a sliding scale.

Deal #1: 100% of profit to and I get 0%

Deal #2: 90% to you; 10% to me

Deal #3: 80% to you; 20% to me

...and so on until we get to Deal #6 and we'll be at a 50/50 through Deal #10. Sound fair?

Why would you do this? Well, you love this business and like to teach willing students. Down the road we could do more deals together and pool resources on larger projects. We'd already have a good working relationship and some trust established. 

Long term, I'd like get into development deals and apartment buildings. Let's discuss if you're interested and we can meet for coffee one morning soon.

Phil

Hello, 

I am interested in learning from a seasoned house flipper and developing a relationship. I propose doing 10 deals together on a sliding scale.

Deal #1: 100% of profit to and I get 0%

Deal #2: 90% to you; 10% to me

Deal #3: 80% to you; 20% to me

...and so on until we get to Deal #6 and we'll be at a 50/50 through Deal #10. Sound fair?

Why would you do this? Well, you love this business and like to teach willing students. Down the road we could do more deals together and pool resources on larger projects. We'd already have a good working relationship and some trust established. 

Long term, I'd like get into development deals and apartment buildings. Let's discuss if you're interested and we can meet for coffee one morning soon.

Phil

@Crystal Smith

Thanks for that simple calculation. I wasn't too far off with my guesstimate of the ARV being around $1.5MM. Quick question: Does the value go down if I'm living in the building and having a unit for a maintenance person? I know the income will be lower, but will the value? I'm thinking as an income producing asset the value will be lower, but the overall value of the building will keep appreciating.

After the initial round of rehab and refinancing, I plan on looking into buying an additional parcel and adding additional parking to make it all off street parking for gated entry only.

@Rick Baggenstoss

Thanks Rick! More good advice and I will work on contacting the owner this week. I know 800K is low, but I've asked my contractor friend and an owner of a 28 unit building in Decatur and he suggested I make an offer of 55-60K per unit. Also, part of the per unit pricing is for exterior improvements ie decks, patios, landscaping. fencing and upgrading the laundry room...the floor plans are good and no walls needs to be moved, but I think some good design advice in the kitchen will add tons of value for the tenants.

@Albert Bui

Albert, 

Thanks for your input on determining value. I will start working on that soon. I like your thinking on cashing out, but I was planning on holding this building long term and getting a commercial FHA loan for 30 years at a really low rate. I've read a lot about those loans and I know it takes a long time to secure one. The 223f loan doesn't cover repairs so everything would have to be done prior to securing it and the value would have to be there as well.

@Seth Wilson , @Crystal Smith & @Colleen F.

Hey Guys!

I have talked with some of the residents and they said they'd be willing to pay more for a much nicer place and the current market rents are $950-1000/month for this property and others like it. Other apartments with full amenities are getting $1700+ for a 2BR/1BA unit, so $1250/month is not unreasonable for a spacious, comfortable and convenient living space. I plan on adding A/C to each unit individually so all would have a separate utilities.

There's enough parking on site to guarantee 1 space per unit and street parking is very common here, even for some of the $750K+ houses in the neighborhood...city life. Another thing is that I'm planning on doing 2 units at a time as the leases run out so I can keep the monthly cash flow going and make the loan payments. I can flip 2 units in 30 days or less with a good action plan and I'll only get better and better at doing it. The key here is getting for a good price and working from there and then get the financing in place. I'm already working on that.

The projected rents with just 13 units generating income will cover all the monthlies during the rehab process with very little extra. However, once everything is complete and I'm able to refinance the construction loan*, it will easily cash flow close to $3000/month.

*I'm looking into private money investors and a lower interest commercial loan because this deal doesn't work with hard money...the rates are too high

Thanks @Aaron Mazzrillo,

Further information as requested:

This is an off market property and I would live in 2 units and convert them into a 3/2 condo and also have on site maintenance man/property manager living in one unit for free. He will only pay for his utilities and in exchange he will collect rent and do all necessary repairs that come up. The numbers work out better than paying a property management company.

I don't know what GSI, PSI and deferred maintenance means, but I'm a fast learner and can get that info quickly or tell you if I have an explanation of the terms. It is a single 2 story building with 16 units at 850SF each. They are all 2BR/1BA and it has on street and off street parking and also has a laundry room. Market rents right now are $950-1000/month for a similar properties in similar condition. This is also an A neighborhood with C-/D+ property and I have J Scott's book, but he doesn't delve into multifamily over 5 units.

Once renovated and updated to 2015/2016 standards with A/C, new windows, new flooring/carpet, renovated kitchens & bathrooms, paint, new decks for upstairs units and new patios for lower units as well as upgrading the laundry room with new or newer commercial grade machines. It will generate a little money, but not much. Additionally, the property will be professionally landscaped and maintained. I'm figuring on approx 35K per unit for all repairs and upgrades, inside and out. 16 x 35K = 560,000. I also don't want to pay more than 800,000 for the building as is, hopefully much less. There aren't really that many comp's but I know similar units went for 85-90K each a year or so ago, but they were in better shape and didn't need as much work as this building does.

Once renovated, I will charge $1250/month rent with and annual increase of 3% per year. My plan is to use this building as a prototype, learn from my mistakes and then move on to another purchase and rehab once this one is complete. My goal is to own 200 units under a corporation or land trust within the next 5-7 years. 

I hope this helps with the information requested. Thanks!

Hello BP Family!

I found an apartment building in Atlanta that hasn't been updated in forever...if ever. It needs a lot of work, inside and out and I want to make a reasonable low offer on it and don't really know how to determine the ARV. Just so you know, it's in a great area with good schools and great neighborhood...the place stays rented, but it's a dump! A dump in a great area and the owner doesn't seem to give a crap about it and only does bare minimums.

It reminds of the house I just bought. The owner-occupant only did bare minimums and never updated anything and I got it for a really good price because she wanted out. I'm thinking this is the case for this apartment building. The owner doesn't seem to give a crap so I want to make a low, but reasonable offer based on the ARV.

How can I get a rough ARV without spending a lot of money on a full commercial appraisal?

Phil

great thread guys! especially @Bill Gulley

I'm looking into buying an off market, but somewhat rundown apartment building in Atlanta, GA. It's close to where I live and in a good area. I'm looking for creative financing options and can personally manage the rehab of each unit. 

My negotiation skills are pretty good, but I'll need to back it up with funding. This particular deal is under $2MM, but renovated and updated would be worth $3MM+ just running quick numbers

Any ideas? Thank you in advance

Phil

@Brian Adams

Hey Brian! Great continuing post! I think you'll need to start a blog or hire someone to help you respond to everyone. 

Like a lot of the other folks on here, I'd like to buy an apartment building in my market...Atlanta, GA. I may even live in one of the units and renovate the others one by one if I buy the building. There are several older apartment buildings that need updating and I know I could buy if I had access to funding. I've just started looking into it and network with other investors in my local REIA.

I have a construction background, but have limited funds. I was wondering if there are any 'sweat equity' type deals that would appeal to private money investors. I plan on going after 20 units and under initially so I can easily manage and supervise the renovations. Just to clarify, I'm going after off market properties that are occupied, are not section 8 and are in good areas

Phil

Just general comments here with a little insight :-)

I'm active in my local REIA and we just had a meeting last week and our guest speaker was the #1 REO broker in the Atlanta area. He said there is less REO inventory now because all the loans after 2008 are of a much higher quality and less likely to become a foreclosure. The good news is that lazy investors thinking they can pluck sweet deals of the MLS will give up and the hard working ones like us will scrape up our deals the old fashioned way...

David,

I think we're all looking for that kind of margin! LOL...

I have something coming up in Reynoldstown. It's a pocket listing from a local real estate company. They are giving me first look and option on it.  Are you open to a joint venture or buying at a higher margin?

Phil