All Forum Posts by: Zachary Dosch

The catch is that the lot that is worth 300k is a river lot that my parents own. Its right next door lot and since they don't want neighbors right now and the lot has actually been appreciating between 8-10% a year, he just wants to sit on it and doesn't have any plans to sell it in the near future - at least not before the 5 year term would be up at which time there should be enough equity to release the collateral. You guys are right, its not the best use of an asset, but I figure that leveraging it is still better than just letting it sit there and appreciate which it will do anyway if we offer it at as collateral.

This situation is far from ideal but the opportunity to get into a 12 plex that is actually about a block away from my house with an on site property manager that costs between $150-$400 a month and no money down is really what is attracting me to this deal.

We are just starting to feel the beginnings of the pressure from the oil field boom in Bismarck. In other smaller cities in the western part of North Dakota, rents for these units would easily be 2k a month. I know it sounds crazy but that is the situation we are in. People are literally building hotels and paying them off in 3 years. Granted, I don't expect anything close to that to happen in Bismarck but we are going to feel some pressure and the rents are only go up.

With this deal, and a minimum positive cash flow a month of $1000k, Im very tempted to pull the trigger on the offer. I would love to be in a market like Minneapolis where you can get properties at a great discount and since Im not really interested in buying properties from places that Im not from or have easy access too, my thought is that this deal is just good enough to do.

The seller is insane if they think they are going to get that price and Im dealing with a big time rookie for a real estate agent for the property. I think Im willing to pay a fair, comfortable cashflowing price but not a cent more.

The way I am getting into the property with no money down is I am offering a lot that is free and clear that is worth about $250-300k for collateral.

The numbers I have from above include $1000 of extra positive cash flow a month. Also, the taxes, insurance, and utility estimates are all a little high just to be conservative.

Thanks for the comments, Mike

Part of what I am concerned about is taking on too much too fast not to mention that I am getting married next fall so I have to consider.

I could handle this property at 10% vacancy. I know its hard to fathom but its virtually 0% vacancy in Bismarck because its the beginning of the oil boom. The demand is only going to increase so I feel like Im not buying this at the peak of the market.

The biggest selling point for me in this whole transaction is that I don't actually have to put any money down and still make it work. The property is listed at 995K but Id like to come in at 750K and not a cent more because that is the point that it cash flows at.

I have everything ready to put in an offer on a 12 plex in Bismarck, North Dakota (where I live) today and just wanted to run it by my brothers and sisters on bigger pockets before I pulled the trigger. Truth be told, Im still on the fence about this because Im 25 and already purchased two properties last year.

Here is what I am figuring for cash flow:
11 2 bedroom units at $700 $7,700
1 1 bedroom unit at $550 $550
Total rents $8,250
Additional Income $450 (Washing Machines and extra storage unit)

Utilities $983
Insurance $335
Taxes $833
Onsite Manager $400
Repairs/Maintenance $250
Positive Cash Flow $1000
Net Income $4899

$4899 will support just under $750k in debt a month. I will be financing the entire ammount (20yr 5.125%) and offering an empty lot worth 300k as collateral.

The place is actually listed at $995k but the realtor is a complete rookie. The vacancies are near 0 in Bismarck due to the oil field boom in western North Dakota. Rents are rapidly going up and the $700/mo could easily turn into $800/mo within a year.

I know the deal is tight but do you guys think its worth it? The ability to own a 12 plex while not putting any money down seems like a great scenario to me but I know that its going to make my cash flow a lot tighter. It is such a sellers market in North Dakota that this is literally the only multifamily unit on the market as of today. It has actually been on the market for two weeks due to the rediculous price and rookie realtor which just rarely happens anymore. Part of my issue is how to get the realtor to take the deal to the owners and have me explain why I am offering what Im offering.

Part of what they aren't understanding is unless a cash deal comes along, this is going to be the next best deal because this property isn't going to appraise for much more so nobody would be able to finance it.

Thoughts, comments, concerns about this deal?

So then the next question has to be why haven't we aggressively developed and marketed a FSBO website for those of us who would not like to us a Real Estate agent? Im new to most of this but it seems to me that most of the leverage a real estate agent used to have is they had access to all of the MLS listing so we had to go through them.

It seems like there are a decent amount of amateur FSBO websites but I haven't found one for my area that does a good job. Are we missing an opportunity here?

North Dakota is absolutely booming with all the oil. Its growing way too fast. Its crazy. People are building hotels and paying them off in 4 years.

Also, Im a Business Banking Officer so if you have any questions, please feel free to fire away!

Jon - sorry for the delay in response.

In Bismarck, we are really starting to feel the housing pressure from the Bakken oil region. There hasn't been a vacancy for quite some time in a hotel, let alone a properly managed rental property. I agree that 2%/50% is a time tested rule to go by but I just wanted to throw my situation out there for conversation's sake.

One example is a single family rental that I purchased about two years ago for 155K (about 15k under market at that time because they guy tried to flip the house but got caught - this is about as good as deals get in Bismarck, unfortunately)and I have a remaining balance of 125k. I just closed on a refinance (15yr 3.0%) where it appraised for 179K which puts my PITI at $1140/mo. The property is under contract for another year at $1500/mo + all utilities which is actually a little light. The roof, siding, flooring, windows, and heating system was just replaced so hopefully I won't have any expenses. If I do, there is a repair fund but I have a fairly strict lease which should cover most issues.

Im not trying to brag or dispute your rule because I do agree with it, I just find it interesting to talk about the different economies in the different parts of the United States and how they affect the definition of whats a good deal to a degree.

Not to hijack this thread but I find it really interesting to hear about the different real estate markets and what constitutes a good deal.

Im from Bismarck, North Dakota where there are rarely foreclosures and if a property happens to foreclose, it sells for market value so there are never really any truly great deals. All the properties that I have bought have been solid, cashflowing properties but they don't come close to the 2%/50% rule.

Man, you guys are the best. I can't tell you what it means to people starting out in this business to have this website with all of you as a resource.

I will absolutely take all of this to heart. At 25 Im just about to buy my 3rd property as a part of a buy and hold with the excess cash flow paying for the downpayment of the next property once my reserves get up to a certain point.

I can't believe how much I enjoy this whole process. Now, back to reading articles for me!