Posted by Mike on May 20, 2011 at 01:06:00:
Going from duplex to a 100+ unit multifamily will require much more education in your part. Acquisition w/o the real hands-on experience and education could get you into a deep hole.
IREM offers some great course along with books that you can order on Amazon. Better yet, hire a broker that specializes in this large multifamily investment properties. They should go over all the infos and details on financials (i.e. cash on cash roi).
Deal or No Deal? - Posted by Rocket
Posted by Rocket on May 16, 2011 at 13:06:13:
First my extended family has rented out duplexes for over 40 years.
So I decided to go into multi units for a higher cash flow.
But I have no experience in this area.
My questions are spaced through out.
Starting with: Is this a deal or not?
I went on to loopnet.com and am looking at 100 Units in Fort Worth Texas.
?..QUESTION: How would I find out what states have rent control?
These are the ACTUAL numbers for the property.
Asking Price: $2,900,000
Gross Rents: $1,022,880
Vacancy/LTL/All Losses: $217,736
?..QUESTION: What is LTL?
Adj. Annual Income: $805,144
Operating Expenses: $550,523
Net Operating Income (No Debt Service): $254,621
Annual Debt Service
(On 75% of asking price ($2,175,000), 5.750% Interest, 25 Yr AM): $164,197
?..QUESTION: What is AM?
Down Payment: $725,000
?..QUESTION: Where can I look for other sources of funding? And at what terms?
Cash Flow (before taxes): $90,424
?..QUESTION: How would I find out what the local taxes are for any given area?
CAP: 8.8%
CASH on CASH: 12.5%
?..QUESTION: How did they come up with 12.5%?
MY PLAN FOR THE PROPERTY
Offer price: $2,465,000 (15% less than asking)
Gross Rents: $1,125,168 (10% increase in rents)
Operating income: $562,584 (50% of Gross Rents, hopefully less)
Net Operating Income (No Debt Service): $562,584
Annual Debt Service
(Basic: on 100% of purchase price, 30 years, at 7% interest - hopefully a lot less): $196,797
Cash Flow (before taxes): $365,787
CAP: 22.8%: Seems high to me.
CASH on CASH: ???
?..QUESTION: How do you figure this out?
Planned profit $100 per unit per month: Annual: $120,000
Cash Flow (After my profit): $245,787
?..QUESTION: Is my math correct?
?..QUESTION: Is there anything I am missing?
?..QUESTION: Is this even Realistic?
THE REALISTIC PLAN
You professional Investors fill in the blanks on how you would work this property for profit.
I live in Utah
?..QUESTION: How would I find a good property management company in another state?
?..QUESTION: How would I find building inspectors in another state?
?..QUESTION: What other questions should I be asking?
Thanks for reading this and for any information you can provide.
-Rocket-
re.rocket@gmail.com
Thanks - Posted by Rocket
Posted by Rocket on June 01, 2011 at 17:18:46:
Thanks for all the info.
Sorry that I haven’t replied. My 76 year old mother is in rehab since she just had a total hip replacement. It Sucks!
I will research all the information that you have provided me.
Again thanks.
Rocket
re.rocket@gmail
Re: Deal or No Deal? - Posted by Mark (SDCA)
Posted by Mark (SDCA) on May 20, 2011 at 13:47:12:
?..QUESTION: What is LTL?
Loss To Lease. Basically, any concessions the manager/owner has to give to rent a unit when it goes vacant during the year ie it’s a reduction to gross expected rent.
?..QUESTION: What is AM
Amortizataion. The length of term that the mortgage is amortized over. Residential mortgatges typically have terms and ams that run the same ie 30 year AM, due in 30 years. Commercial often doesnt ie 25 year AM (payments spread out as if the loan was a 25 year loan) but loan is due in 10 years (typically will be re-financed).
?..QUESTION: How would I find out what the local taxes are for any given area?
County assessor or tax collector.
CASH on CASH: 12.5%
?..QUESTION: How did they come up with 12.5%?
Cash Flow (before taxes): $90,424
divided by
Down Payment: $725,000
Hope this helps,
Mark
CAP: 22.8%: Seems high to me.
It is… because…
Vacancy/LTL/All Losses: $217,736 (this is the actual, not your pro-forma)
You are assuming a ZERO vacancy factor. That wont happen.
Re: Deal or No Deal? - Posted by Mike
Posted by Mike on May 18, 2011 at 07:26:31:
Also, i wouldnt be putting 25% down either, The most i would put down is 10-12%. Especially if any repairs are needed.
Re: Deal or No Deal? - Posted by Mike
Posted by Mike on May 18, 2011 at 07:24:36:
What are the taxes on this property?
How often do they reasess the properties in this area?
What is the current occupancy?
What is the occupancy of other apt complexes in the area. Need to do a demographic study.
I would look for ways to increase the value of the property (cure vacancy, reduce expenses, appeal current taxes, etc)
Also do some test ads in the newspaper and craigslist to see what kind of response you get when advertising a vacant apartment
Make sure tenants are paying rent, ask to see bank statements from the seller or checks that have cleared.
Past tax returns particulary from the IRS and not the seller as he can alter numbers, its happened!
Any contractor estimates for repairs?
Coin Laundry?
Re: Deal or No Deal? - Posted by Brandoncbsre
Posted by Brandoncbsre on May 16, 2011 at 13:13:38:
You should provide more info about what kind of experience you do
have in real estate and more about your financial situation to get
Better responses.
Without having any of the above info I would recommend getting
your feet wet with a 12 to 20 unit property that you can manage
YOURSELF so that you really get a good feel for the task at hand
in managing a complex.
Re: Deal or No Deal? - Posted by Rocket
Posted by Rocket on May 17, 2011 at 12:20:09:
I have about 20+ years of land lording experience with 5 sets of duplexes, which is one of the reasons I want to expand into multi units.
I am looking for private financing and seller financing.
Any information you can provide will be helpful.
Anything else?
-Rocket-
re.rocket@gmail.com