bank owned apartment buildings - Posted by mr. Newb

Real Estate Investing Apartments
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Posted by Tony Colella on March 01, 2011 at 10:38:54:

Brenda,

My post neither encourage nor discouraged anyone from investing in apartments or anything else for that matter.

I wrote:

“Investing is not about the niche it is about a means of making money in a manner that is comfortable for the individual investor. That might be mobile homes today and apartements tomorrow for some. For others it may only ever be mobile homes. There is no right or wrong just whatever works for you.”

Your post is a good reminder that we have to buy for less and build in money for unexpected expenses. We cannot control the gov’t regulations, taxes or the economy but I do Not believe we should tell people NOT to invest because of these problems but rather include them along with other due diligence considerations.

Tony

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bank owned apartment buildings - Posted by mr. Newb

Posted by mr. Newb on February 23, 2011 at 14:35:11:

Hello, I know this is not mobile home related… but I would rather associate with you guys… because I’m a mobile home man myself and I know we have the same thought process :slight_smile:
Anyways are you guys thinking at all about bank owned apt complexes? They are out there and they are cheap.
What do you guys think?

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Re: bank owned apartment buildings - Posted by lando

Posted by lando on February 25, 2011 at 10:33:53:

I’ve looked at a few “bank owned units” and have to admit to be less than encouraged. There are mostly newer 4plexes built for owner occupied dreamers to have a “rental”. So they built a “minkrash” 4plex that cost them $100K a unit and suprise! There is not enough money coming in to service the rediculous debt.

My market sets the rent cap at about $500 per month for a family that is a working class to pay no matter how gorgeous the place is, families simply can’t pay more, they move out too much, the banks want 50K-100K per unit for these “great deals” and they usually want it all cash!
My opinion they simply don’t pencil out without stress and stretching the numbers to elasticity. Our area with the costs of taxes, insurance and other costs that run to 65-80% of the rent, limits a $500 rent to a $20K unit. And even there woe be unto you if it gets severe vacancy or no pay tenants!

I looked at a duplex recently that is advertised at about 120K, and advertised that it “cashflows”

120K 15 year loan 7% interest payment 1078.59 (cree calculator) 2 weeks ago I got just loan, the actual rate was (6.58)

taxes 250
water 75
garbage 30
insurance 65
maintenance 100 ($50 per unit)
management 100 (10%)
Vacancy 200 (%20)

total expenses $820

Rent 1000
Total left for debt service $180

At that rate you would need a 30 year loan at -3.6 interest for it to “positive cash flow!”

Then this property has a huge yard that would need mowed and watered all summer long, (best part of $100 per month) and that would take up even more of the money, making it almost a bad deal to take it free!

So be careful with those great deals.

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Re: bank owned apartment buildings - Posted by Tony Colella

Posted by Tony Colella on February 23, 2011 at 20:01:07:

Kind of an odd question I have to admit.

If you are interested in apartment buildings and you find one that offers good numbers at a good price why wouldn’t you?

Many of the regulars here have investments outside of mobile homes or have in the past and many I know are considering them now.

Investing is not about the niche it is about a means of making money in a manner that is comfortable for the individual investor. That might be mobile homes today and apartements tomorrow for some. For others it may only ever be mobile homes. There is no right or wrong just whatever works for you.

Tony

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Re: bank owned apartment buildings - Posted by shawn sisco

Posted by shawn sisco on February 27, 2011 at 16:47:40:

Great Post!
I have for several years marvelled at duplexes that in my area are built and marketed to the sort of buyer that you have so aptly described. This truly amounts to “subsidized housing” as new units are built and made available at prices below the costs that these investors are incurring. And yet it happens all of the time.

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Reality check - Posted by Dr. B. (OH)

Posted by Dr. B. (OH) on February 25, 2011 at 21:32:44:

Thanks lando for showing people how to work the numbers of a bank-claimed “cash flow” property! I completely agree with you on knowing your market first.

An investor should know what is a maximum price to pay for an investment of any kind before he/she leaves their house to go look at it.

Steve

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why not? - Posted by Brenda (OH)

Posted by Brenda (OH) on March 01, 2011 at 10:26:09:

Because the county can double your real estate taxes by upping the property value faster than you can raise the rents to cover the cost…

My taxes doubled in the 10 years I have had my apartment building, due to revaluation, school levies, road levies, county levies for the zoo, the mental health hospital, etc. And that is with me getting a tax reduction for living in property…

The utilities also went up, 25% or so, despite me putting in new windows, and a new higher efficiency boiler…I pay the heat, but cannot charge a premium for that, the rental market is so soft now…

if the apartment building wasn’t where I live, it would be a lousy investment… the only good thing is, I had refinanced it into a 15 year loan 7 years ago to lock the rate, and if I can hold on, in 8 years, it will cash flow instead of cash suck…

and I paid a decent price at the time I bought it…it was in good condition…unfortunately, good means the boiler lasted 1 year more, and the roof made it 2 years more lol.

Brenda (OH)

ps: I should add, one good thing, my tenants let me set back the heat during the day to 66 degrees, and from 11 pm to 4 am (one lady gets up way too early!) to save fuel costs to help limit their yearly rental increases.

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Re: bank owned apartment buildings - Posted by lando

Posted by lando on February 28, 2011 at 14:13:53:

I know, I have about 125K coming in that I have to spend because it will be 1031 with a basis of about 30K.

I want to get some cash flow out of the trade, (nice if it produced $1300) but there is almost nothing you can buy in my area that even remotely cash flows in my way of thinking. You can buy a duplex that if it was completely paid off, it might make a couple of hundred a month.

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Re: Reality check - Posted by lando

Posted by lando on February 26, 2011 at 10:03:52:

NP Steve, I told the Realtor that I would make an “offer” on that duplex simply because it borders our other rentals, but after pushing the numbers I was like nobody in their right mind would buy that thing. Either the rents are going to have to go up, or there are never going to be any other rentals built around here! It pencils out at a value less than the cost to re-roof it!