All Forum Posts by: Stephen Blair

The wife and I have been looking at local real estate for another rental to add to our portfolio. We came across a deal by word of mouth only a few miles from us that has not been brought to market yet and it has peaked our interest. Older owners looking to retire and travel. They are looking to sell by owner their property/business. 3 acres zoned commercial with a older studio apartment, a 2 BR 2 Bath owners quarters custom home built in 2020 with a big workshop, and 13 (Long term) monthly RV full hookup parking spots.

The studio apartment rents for $800 month utilities paid.

The RV spots rent this year increased to $400 a month with utilities and occupancy rate is typically 90-100% last several years. Some tenants have lived there for years.

The house and shop could potentially rent for $1800. We would keep our current home since we are so close. Also we would plan to self manage it.

Looking at $93,600 gross annually, with estimated NOI of about half that. Biggest expense being electric on the spots in the hot and cold months of the year. Several value add options we see by driving by, like signage, advertising online, possibly meter the spots for electric reducing and stabilizing that expense. The seller is asking $535,000 and is willing to seller finance with a 10 year balloon. The other terms interest rate etc. have not been discussed yet. Kind of a unique deal here, buying an apartment, single family home and RV park all in one. This doesn't seem like a bad deal to us but wanted to hear your thoughts. Any pointers on valuing a property of this type? We appreciate any input you have to offer.

Thank you! I decided to go back to the owner and negotiate on the price to 1.3m and 200K down after running the numbers in all different ways. He needs the bigger down payment. He really wants 500K down. After upping my maintenance percentage to 20%, with property management, the ratio was .75. That was $1.3m purchase price, 200K down (I wouldn't have had to use the HELOC) and with the rents upped and no vacancies. Still maybe a good deal for someone, but honestly I just can't afford it and it's probably a bigger first deal than I should bite off. The margins were too close for me. I decided to pass on this deal. However, I have learned alot in the process and am better equipped and ready for the next deal that comes along.

Roger that sir, thanks for the reply. 

 I thought about that, I really don't want to sell it. It's on a shared parcel with my home and it brings a premium rent and has awesome long term renters. Have you ran across many deals to where it was almost impossible not to cash flow or is that a unicorn? I'm new to this game, I only have the one home but I am always looking for other opportunities and to learn from other folks doing it. Are we always seeking and always expect to cash flow on day 1? I know that's what everyone wants but is that reality or does it typically take a little time to get to that positive cash flow? 

Hello from Arkansas. Love the forum here and the information. 

My wife and I are considering buying an 18 unit rental property on 5 acres. The units are all in good shape and need nothing at the moment. Currently rented below market value, no automation, all manual pen and paper checks or cash and the owner self manages. Tired older owners that want to sell, I know the owners well. It's three 4 plex's, one duplex, small single bedroom home, small two bedroom home, and large owners current home with small apartment attached. Good location in a good rural area close to a military installation and only two miles from my home.Two vacancys now but he doesn't really advertise at all. I think these could be filled easily. His home would also be up for rent once the property was purchased and he moves out.

Listed for $1.75m but offered to me for $1.5 with owner financing and $350K down at a 7% rate for 40 years. I am trying to negotiate at 6% and my numbers below are based off that. I would put up 200K out of pocket for the down payment and use a HELOC for the other 150K which we would pay down as fast as possible probably within the first 5 years before the repayment period starts. Rentals are currently bringing in $11,000 month. That would go up to $14,000 once the owners home was rented and the two vanancies filled. Within two years I believe the rents could easily be raised to bring in $15.6-16K month. There is also bare land with spots to put up storage units or charge to park campers or boats.

Estimated expenses taxes, insurance, utilities, are around $30K year and maintanance is a wildcard estimate at around $20K year. I would self manage for now with a program like turbotenant. The apartments have all been renovated a few years back with new roofs and updates so no real known maintanance problems.

Running the numbers in a rental calculator including payments made to owner, if rent was raised to $15,600 month with zero vacancies and $50K year expenses I am coming up with a $60,744 cash flow, 17% cash on cash return and 9.11 cap rate. However that does not take into account the HELOC payment which we would put around $2k a month toward so that $60,744 would be reduced by $24k down to $36,744. Of course, these numbers would of course be lower before we raised the rent and filled the vacancies. With two vacancies and the owners house not rented, and the rentals bringing in $11K, we would be at a 0 or negative cash flow by the time we subtract the HELOC payment. Technically we could pay interest only on the HELOC until we got the vacancies filled.

We own one rental property now that is paid off but this is the first type of deal of this magnitude that we have considered. What are your guys thoughts on this deal? Is the fact that the property can pay for itself and still provide a little cashflow the first year with a steady rise after that a no brainer or what are we missing?