All Forum Posts by: Rohan J.

I'm considering purchasing a 5-plex in Blue Springs, MO (a very nice neighborhood near KC Metro) because the neighborhood and deal look great, but I still have quite a bit of concerns that are preventing me from making the leap. Mainly because it used to be a single family home, and it was converted ~10 years ago. Now it's a torn-down 5-plex and 4 of the units need rehab.

Numbers = $75k purchase price, $35k repairs, ARV = $180-200k . Minimum rent = $2500/mo after repairs.

Obviously the numbers are great, but the place is gutted, has no separate meters (since it used to be a single family), and doesn't necessarily look/feel like a small multi-family building (it looks more like a house, since thats what it used to be).

Everything is properly zoned to be a commercial 5-unit, and the neighborhood is A-/A . 

What questions would you have to dive into before making a purchase like this???

Hi BP,

I live in CA and am trying to do a 1031 Exchange for my $500k CA investment property into a mid-sized apartment complex somewhere in the Midwest in the next 30-60 days.  

Would prefer to purchase something that has a clear-cut way to immediately add value.

Here is my criteria:

• Goal = strong cash flow in a decent market
• Purchase Price = $500k - $1M (aiming for under $50-60k per unit)
• Neighborhood = B-/B neighborhood . I've found that too fancy neighborhoods aren't great for returns, and junk neighborhoods have too much headaches + turnover.
• Population size: Would like the city of rental to have at least a ~25K population (list of major midwest cities)
• Age of Property = I always aim for under 75 years old (don't like the maintenance required for old properties). Ideally I'd prefer under 50 years old.
• Are Rehabs okay? Absolutely. I'm fine with value-add properties, just nothing with major structural or foundation issues.
• My #1 problem in the past = Tenant turnover. Nothing kills returns like constant turnover and tenant placement fees. I'm looking for strong demand and areas where people like to stay for a while. Even better if it's near a strong school district.
• The numbers = What's worked in the past has been finding properties that rent for at least 1.5% of the purchase price (e.g. a $60k property renting for around $900/mo); this seems harder to find these days, which is why I don't mind moving into a slightly lower neighborhood.
• Rents = I would like to purchase something with a price point of under $60k per unit, where 1B/1BAs rent for $600+, 2B/2BAs rent for $700+, and 3B/3BAs rent for $800+ .
  
  Why those rent prices? I've noticed that when rents get below $600, I start to get a much lower tenant demographic that causes a lot of headaches.
  
  I've also noticed that when rents get too expensive ($1200+), my tenant base shrinks dramatically and I have much longer vacancies, since not too many people can afford very high rent prices.
  
  This is why I really like the sweet spot of around $600-900/mo in rent prices, as there is always good demand and strong tenants in this range.
• Type of units? I just want to avoid purchasing a property that has a majority % of Studio units. 
• My main concerns are (in order): neighborhood of property, overall rent-to-price ratio, age of rental property, current condition of property

If it's not at least a B- neighborhood, I won't care how great the numbers are. Neighborhood is everything to me.  I'm going to fly out for a week to ensure that neighborhood / surrounding area /etc look great.

Need to find something in the next 30-60 days.

Please PM if interested. Thanks

@Mo Gold - thanks man . i'm contemplating whether this needs a serious "design" touch-up, but it's great to be more knowledgeable about this resource now. never knew about how to tackle this design scope, so appreciate your thoughts

@Matt Pritchard - really appreciate the advice. would you cut the trees outside?

@Jeff Berg @Jonathan C. @Matt Pritchard @Dorian Jones 

Hey guys - because of all the great responses, I wanted to share some pics. 

Would love any further feedback based off some of these visuals.

Some pics of the Outside:

Some pics of the Inside:

Also, just realized I made a huge mistake when initially talking about the property:

This is actually a 5-plex with 4 one-bedrooms, and 1 two-bed/bath. I initially made a mistake and said they were 4 studios and 1 one-bedroom.

If I can at least rent the 1-bedrooms for $600 a piece, this would be a huge win (it would probably rent for around $500 by just fixing it up and making it livable again. Hoping to add $100/mo to each 1-bedroom by making it more "elegant").

The challenge here is that I know I can't get more than $650-700 for each 1-bed, because that is similar to the price of a 2-bedroom in the area. So I'm trying to upgrade it a bit, but not TOO much... since there is a pretty clear cap in how much more in rent I can make.

Thanks for all the responses guys. Lots of great suggestions in here. Looks like i need to spend some time thinking about the outside curb appeal as well. Matt Pritchard I will follow up with you shortly. Thanks for the offer to assist! Antoine Martel not in LA at the moment but will connect with you too . We can do a quick chat over the phone too.

Hi BP - In two weeks I am doing my first purchase and repair in a very nice neighborhood in Blue Springs, MO (an "A" neighborhood in Kansas City). It is a 5-plex with 4 studios and 1 one-bedroom. I have only ever done BRRRRs in B- or C+ neighborhoods, so I was wondering.... what kind of things should I look to add into a nicer property? So far I have: granite countertops, stainless steel appliances, and breaking the kitchen open so that it's more connected with the living room (right now the kitchen is closed off). How else can I make this feel richer and more luxurious ? Any colors that I should aim for? Anything to put in the bathrooms? It is going to be a full rehab so I am open to any suggestions on how to efficiently add value. I am a total newb at repairing in luxury areas, so any thoughts are appreciated

@Priyanshu Adathakkar could you go into a bit more detail on each of these, and why you're bullish on both?

Quick question about JV deals: I always wonder how people form partnerships for the first time right before a deal occurs. Like do most JVs actually form LLCs well before a deal, or do they just have a contract written up by an attorney once the property is found, and keep this in place until the entity filings come back?

Andrew Johnson great points man, and really appreciate you bringing numbers in this division as a point of reference. Definitely need to inspect the property potential further to make sure my rent increase assumptions are appropriate. Unfortunately there are no real actual for the past 12 months - would you even consider this property if 4 out of 5 units were empty for past 8 mos+ ? Only thing that keeps me in this is the neighborhood - it's damn near an A area.

Thomas S. Joel Owens Chris Eaker Hey guys, so i just found out that this property has "level pay," which is apparently where the utility company finds the average and charges that monthly, so that there is no up and down in billing and everything is a fixed expense. Anyone ever done this ? Would love to hear this groups' feedback.