All Forum Posts by: Zachary Dosch

Completely agree.

The only thing that banks like about 30 yr. loans is they are basically all interest within the first 5 years which is typically how long an average person stays in the same mortgage.

Im a business banker as well as a real estate investor so I may have a different perspective on this.

The key is to really understand the institution that you are trying to lend from. A general rule is that the bigger the institution is, the less flexible they will be. Also, get bids from multiple banks which will force all parties to put their best foot forward if they really want the deal.

A lot changes over 5 years let alone 30 years. Couple that with historically low interest rates and its no wonder why banks don't want to commit to money at that rate for longer than 5 years. Who wants to lock in rates at 4.875% for 30 years when they could easily be 6% in 5 years and then have to honor that lower rate for 25 more years. That is just setting the table for another disaster.

There is much less bad debt for commercial loans compared to residental loans because they are monitored more closely and the banks generally hang onto the loans and you can be sure that they are going to be more careful when they are lending out their own money vs. somebody elses.

Basically, I think personal residential mortgages should be more like commercial property - have the loan be reevaluated at the 5 year mark and if the person can still afford it and everything is good then refinance and if not, tell them to sell the place. They would do this if they really wanted to fix the housing market but the problem is it would be too much work and it lower the values of homes back down to where they should be.

From the banks perspective, locking up money for 30 years is never a good idea for the same reason you don't have your tenants sign 30 year leases.

Where does everybody get their floor plans for their construction projects (2-12 plex)?

Does anybody use the free ones on the internet

My take is that a very good realtor is more than worth it. The problem that Im finding is that those good realtors are very few and far between. I can't tell you how many handouts I have given over the years...

The guy that I turn to most in real estate investing is actually my tax guy who has upwards of 100 units. Ive known him almost all of my life as he coached me in midget football and is a great family friend. He actually showed me the books on some of his units.

I wouldn't just do a deal to own an apartment building. Actually, what I have really grown to like is single family houses. Im actually renting two of them right now for $1500 + utilities a piece with monthly payments of just around 1,000/mo and one of the loans is a 15 year loan as I came across an amazing deal from a guy just wanting to unload the propety because he tried to flip it and got caught. I a lot more comfortable with this type of renter than somebody that is going to be renting an apartment for $700/mo. I plan on doing more of them but I will likely only do one every year or two as I move into them as my primary residence first, basically for financing sake (staying longer than the necessary time for owner occupied financing), then moving onto the next one. For my next one, Im actually looking at building a duplex in the spring/summer.

The only catch with these is the 10-20% down they require because I can't leverage the lot. If I could leverage the lot, I would rather just buy 3 houses and rent them out rather than apartment complex but those are the rules.

Thanks for all of advice, guys, it really means alot.

Again, those are valid concerns and great points.

The 20 year amortization is only fixed for 5 years at 5.125%. Right now the plan is to refinance the property at that 5 year mark for the full 20 years to give myself some more breathing room.

If the property manager decided to move out, I would be taking over everything. It would be a pain, but I actually live a block away from the property so I would take over everything.

Part of what's frustrating me is I read about everybody else's awesome deals but Bismarck's market just doesn't yeild amazing deals. It only yeilds solid deals that slowly appreciate over time which is why I hesitate to call this a boom because it really isn't. There are no other multifamily units on the market at this point because they get bough up usually before they hit the market. Its a hell of a situation to be in.

You guys are completely right but some mitigating information might help to carify the situation. There is a brand new hot water system through out the property, the roof was replaced in 2005 and the siding was replaced in 2005. All the units were updated as the tenants moved out (there are some tenants that have been there 20+ years). Part of what attracts me to this deal in addition to what I previously stated, is that most of the updates are already done so there won't be any scheduled maintenance for a while. I realize there there will always be things that I come across but at this price, Im going to be extra picky with the inspection to make sure Im not going to get stuck with something. I know its not the smartest way of looking at a property but could the fact that there is basically 0% vacancy help to mitigate this to a degree?

Another mitigant is that there is an onsite property manager that is absolutely solid gold. The guy basically does everything and can fix most plumbing and some electrical issues and works for $10/hr which historically has been no more than $400/mo. per the cash flow.

Also, on the financing, Im actually a Busines Banking Officer and the loan would be done through the bank that I work for. The terms that I have already worked out are 20 years @ 5.125%. I have everything with the bank so they look favorably on this situation.

The issue of low rents is something that I have always gone back and forth over. There are 11 2 bedroom units with a garage. The units are about 1000 sq. I always hesitate with a property with low rents because playing the bad guy and raising rents on older people who may be on a fixed income isn't always the funnest thing to do. Currently, the rents are at $650 for the 2 bedroom and $500 for the 1 bedroom that I would immedately raise. Realistically, I could get up to $775 - $825 in no time but how would you guys suggest I go about it? I have checked with other units that are for rent in the market and am confident in these rents. Should I go $25-50 every 6 months to a year or should I raise them more right off of the bat and risk having a unit open for a month?

Ok - It looks like I need to reconsider. Its really too bad because the market has been so consistently strong and the properties have been so well buit that nobody that I have talked to have gone wrong.

When you guys say expenses usually equal 50% of total rents, what does that all include? Maybe that will help clarify my thought process.

Unfortunately, I don't think it is very realistic that my offer will be accepted at $750k as crazy as it may seem.

Am I still making an appreciation play if it is a cashflowing property?

Essentially, the strategy that I have been employing is a buy and hold strategy for the most part. I just want to get 5-6 comfortably cashflowing properties, pay them off asap, then ride into the sunset.

I apologize if I came off as trying to argue - it wasn't my intention. I was just trying to address the issues that you guys raised by explaining more about the situation.

You guys all raised valid questions and I thank you all for those questions and I am much less experienced than all of you. Its hard for me to respond and come off with the type of tone that I want to. This would be much easier if we just discussed this over a beer! ha

The issue that I run into in my markets is that no properties fit the 50/2 rule but people still buy them at an incredible rate. It doesn't make me feel great about the situation but its what I have to deal with. There are still a lot of people making a lot of money. I wish I could better verbalize what is going on in North Dakota because it is unique. There are never any great buys or foreclosures but property values and rents have risen right around 3% for the past 15 years or so. It doesn't get too high and it doesn't go backwards.

Are there any other questions that you guys can think of?