Posted by danny on December 13, 2000 at 14:04:39:
the unit says potential thats all i know from the website i can find out more,on the due dilligence info it says that sometimes he gets a due dilligence team,would this be also something a lawyer can do for your checklist
deal from local investment club - Posted by danny
Posted by danny on December 12, 2000 at 06:11:00:
hi ,
need help from anybody who believes this might be good or bad?
here are the numbers from my investment club
price 142,000
market 150,000
value
equity 7,100
est.gross 24,890
income
expenses 5,337
tax 1,797
total exp 7,134
net
operating
income 17,756
debt
service
for yr 12,544.68
monthly
mortgage 1,045.39
cash flow
per yr 5,211.36
cash flow
per month 434.28
Re: deal from local investment club - Posted by JPiper
Posted by JPiper on December 12, 2000 at 09:45:55:
My guess is that the expenses that you mention are too low…you probably ought to be projecting $10K in expenses give or take.
So that you know, an expense/vacancy number of say 40% is going to get you into the ballpark UNLESS the property is old…in which case the number should probably be higher. Since I normally deal in older properties I will typically use 50% an initial evaluation.
If you happen to operate the property for less than these expenses then that’s wonderful. But don’t assume you will. Buildings develop problems over time…things like roofs wear out, furnaces/AC wears out, the exterior needs painting. What an investor should be doing is creating a set-aside for the ultimate replacement of those items…called deferred maintenance.
This isn’t an expense that you write off on your taxes. But it IS money that will come out of your pocket at some point. It may not be written off as an expense even when it occurs, but rather be a capital expenditure and simply be an adjustment to cost basis which can later be depreciated.
Assuming all your other numbers are correct, this difference in expenses drops your monthly cashflow to $195 per month. Whether this is a good deal would depend partially on the financing that you will buy with and based on the value of other comparable properties.
JPiper
Need more info. - Posted by BillW.
Posted by BillW. on December 12, 2000 at 06:21:42:
Danny,
It’s hard to tell what you have here. Looks like a multi-unit property. You don’t say how many units, mix of the units, rents, etc. How about some more info? Also, on the face of it, looks like there’s not enough money for operating expenses. Check to see if there’s any allowance for management.
Also, on the commercial forum, look at Ray’s article on due diligance. You will see that there are a lot of items you’ll need to check out.
BillW.
Re: Need more info. - Posted by danny
Posted by danny on December 12, 2000 at 10:35:31:
there are 3units at 800.00 /month ,two are rented and there is room for a 4unit potential
Re: Still need more info. - Posted by BillW.
Posted by BillW. on December 12, 2000 at 12:45:33:
Danny,
By your answer, do you mean that you could potentially construct a fourth unit in the existing building or that you would have to build a fourth unit as a separart building?
Also, When you’re assessing the deal, you want to only work with the income numbers that are actually there when you are making the offer. You also need to do a projection of your operating expenses for the property to see if things work, not rely on current stated operating expenses. Sometimes sellers leave out expenses that you should include.
BillW.