All Forum Posts by: Seth Borman

 I worked for a couple of guys that didn't want to pay more than $130,000/dr for Los Angeles MF. As a result we showed up to look at a property once and were introduced as "the guys that buy studios."

$/SF is actually a pretty good metric as it will give you some idea of the value add potential.

 Utilities are pretty consistent. As for rents... you would be crazy not to ask what the current rents are.

Rules of thumb are a very lazy way to do business.

You can build a generic pro forma and plug every applicable number in, take five minutes, and come up with a reliable look at your future CoC, CoC including principal repayment, IRR, etc.

Build your pro forma to reflect the base case and then the pro forma case. That way you'll be able to judge the opportunity for value add.

Similarly, saying that 50% or more of your gross rents will go to expenses is simplistic at best. I've never seen higher than 60%, and typically when we did buy it was for properties that stabilized at 25% or so. 

An example of this is water bills. Actual water bills ranged from $30 to $208/mo at purchase. Following renovations and work to reduce cost they stabilized at $25/mo, with a year worth of bills from hundreds of units to even out the sample size.

The price will be in between the current and pro forma values. The seller will capture some of the potential and the buyer will discount the future potential against the risk and cost of achieving it and that means you will meet somewhere in the middle.

The best way to figure it out is to build a pro forma showing the schedule and costs involved and figure out how much you are willing to pay to achieve your investment goals.

A newer washing machine will use a lot less water. If the tenant is making your bills that high then look for a way to get her a new one. Your utility might have a program to offset the cost.

Aerators and showerheads are a great investment. Toilets will save more water than anything that you do.

Dishwashers, believe it or not, will save a lot of water as well.

Lastly, make sure that there are no unlocked outdoor faucets.

In Los Angeles you can have one. Portland and San Francisco have different rules that allow more under some circumstances.

Finance, civil engineering, urban planning, real estate, construction management. 

Why a triplex? Is it a 2400 SF lot?

Absolutely not. Joining the military is a fine thing (I've done it) but not something to be done lightly... and with FHA or conventional mortgages available the VA loan isn't really that great anyway. Particularly if you have to pay 2% in funding fees.

Now, if you can get a $40,000 bonus for enlisting you may be on to something.