All Forum Posts by: Roberto Gutierrez

@Nathan Platter I think he is saying he is buying/rehabbing the houses with his HELOC, then refinancing to get his money back. Correct @Chad P.?

I think the climate should be taken into account. Here in Nashville we are using slabs on grade, but it doesn't get too cold here. The radiant heating is also a great idea in a colder climate. I saw you mentioned putting tile floor over the concrete. Why don't you just polish and seal it? It looks great and will hold up great against large dogs.

Another thing to consider. You may need to use a truss system to run the ductwork in the ceiling. Another cool idea is to leave the ceiling open, paint the joists black, and shell out for some nice modern exposed ductwork. This looks really good with the concrete floors.

I have a similar structure on my builds here in TN. We do a set build fee of 25k per house. We're also achieving modern designs for $100-110/SF depending on factors that have already been listed. One area I haven't seen mentioned is flooring. Building on a concrete slab foundation and polishing/staining the concrete floors saves a lot of $$ and looks great in my opinion. No joists/block on the 1st floor this way. You can shell out 2-3k more and heat them if you're in a colder climate. I'm also experimenting on a build right now and exposing the ceiling joists on the first level as well as the ductwork. We're painting the joists black which goes really well with the concrete floors, gives a modern/industrial look, and makes the room feel larger.

I think there are too many variables to give you a straight answer. Ex - Properties where utilities are paid by the landlord could have 10% higher op expenses. Something built in the 70s will probably cost more to run than a building built in the 90s. I have found the 50% rule to be a great place to start when i'm analyzing something. If the deal looks like it will work with 50% or is close at the price I've negotiated, then I request ~20 due diligence items so i can verify taxes, insurance, maintenance, etc. You might walk away with a 40% op ex ratio after analyzing it all or it could be higher. I could go on and on. 

I would google "2016 NAA Survey of Operating Income & Expenses in Rental Apartment Communities". That's a great article and you can see the market averages based on a ton of different variables.

Hope my answer helps!

Definitely go to REIN. Great place to get started. I invest in multifamily and build single family retail homes here in Nashville. Would be happy to chat over the phone or in person if you're interested in the ins and outs of either of those.

The issue I see with this one is that your not buying it based on current cash flows. I understand it is 8 units for 230k, but the going in cap rate must be very low. You mentioned if the furnaces go out you will hopefully replace them with reserves or cash flow. I would make sure you have that money allocated from the start because you're down a unit if that goes and you can't fix it. I wouldn't be surprised if expenses are higher than 50% of gross rent on a property this small, so you might need to increase that number. 

I also think you should recalculate your cash on cash with the first couple of years in mind. If you are buying this in cash you probably won't see much of a return the first year, and if you cash flow 13k in year 2 your at a 4% cash on cash with the 330k all in costs. Again this is assuming you are buying with cash which i may be misinterpreting. 

It just seems like a lot of risk for a small reward. For an asset that isn't occupied I think you should be able to refi and pull out all of the cash. If you have that much cash to invest you could even invest passively in a syndication or partner with a syndicator. You could fund the pursuit costs for 6 sizeable (100 unit) multifamily properties with 300k and end up with all of your money back and hundreds of units in three years.

Thanks James! That is something i'm currently looking into. Would really help NOI. If the market doesn't support tenants paying water then we're going to install low flow fixtures while renovating, which will hopefully cut the water bill in half or more.

 Thanks Todd! I was able to get the formula the city uses for property tax and i've included the new property tax numbers based on my purchase price in the pro forma. I've got 2014-2016 operating statements so we're thoroughly looking into any highs/lows and normalizing the numbers.

 Thanks for the reply! I just received all of the due diligence documents requested, so I will definitely be digging in to check that all revenue/expense items have been reported correctly. Owner isn't paying heat by the way. Only utility provided by owner is water.

 Thanks for the reply! That is great insight into the area. That's along the lines of how I pictured it based off of what research I've done. I would love to find something in Clarksville too