NEED ADVICE PLEASE - APTS AS INVESTMENT? - Posted by jp moses

Real Estate Investing
#1

Posted by Jim Locker on December 15, 2000 at 09:32:51:

You might also ask if there is any owner financing. Find out if tenants are on leases or MTM agreements.

You should ask about average turnaround time for vacancies, although you won’t necessarily be able to believe the answer.

You might also want to contact the police and find out about frequency of calls to that building and neighborhood.

If you are going to get into this, you need to learn to screen tenants. I posted a “how to” on screening tenants here:
http://boards.fool.com/Message.asp?mid=12860224

I strongly recommend that you contact a local real estate investors group to “get educated”.

#2

NEED ADVICE PLEASE - APTS AS INVESTMENT? - Posted by jp moses

Posted by jp moses on December 15, 2000 at 05:17:31:

Whilst I was out & about town today, I stumbled across four 1br/1ba apt units for sale near Univ. of Memphis (i.e. VERY rentable location).

With cash flow on my mind, I called & left a voicemail with the owner expressing my interest. I’m now awaiting his reply, but…what do I do when he calls?

I’ve never owned & rented anything other than SFRs before & need to know what to ask about, look for, or expect from the owner(s) in considering whether or not this is a winning deal. Here’s what I’ve thought of so far:

Price (obvoiusly)
Vacancy history
History of repairs
Current rents charged
Average monthly cost of maintainance/upkeep

So…what else do I need to consider/find out? Please help if you have any experience or insight to offer. Thanks much!

…jp

#3

Re: NEED ADVICE PLEASE - APTS AS INVESTMENT? - Posted by Jen-LA

Posted by Jen-LA on December 15, 2000 at 19:08:48:

I don’t know about the apts, we haven’t made that step yet, but I went to the univ. of memphis for a year! We lived on North Graham street right there off of walnut grove- and that area would be a great investment area in my opinion. Actually, we got started looking at real estate investing in memphis (we are in baton rouge now) because of all the cool little houses around u of m. Anyway- just wanted to wish you luck and say hello to a fellow (former) memphian!
-jen

#4

Re: NEED ADVICE PLEASE - APTS AS INVESTMENT? - Posted by JPiper

Posted by JPiper on December 15, 2000 at 10:22:38:

I would want to know:

  1. Rent per unit. Of course the rent per unit will add up to the total rent, but I like to know the rent for each individual unit because they may vary. You may be able to pick up some clues regarding whether rents are moving up (perhaps indicated by some rents higher than others).
  2. Are any units vacant now? The temptation on the part of sellers is to include the rent for vacant units in a total rent number?.sometimes called gross scheduled income. I wouldn?t pay for income that does not exist at the time of purchase.
  3. Are there leases? When do they expire? Obviously a lease will impact your ability to raise rent.
  4. How much in deposits? Deposits should be credited to you at closing?so you should know how much they are?it could impact how much you need to bring to closing.
  5. How old is the building? I like to ask questions like how old furnaces are? How old AC is? Questions about plumbing and wiring? How old is the roof, what type of roof? All of this dovetails into the next question.
  6. Condition of the units? Clearly this might give you some indication of money you may need to spend immediately.
  7. Do the tenants pay their own utilities? Is the building separately metered? If you have to pay the utilities this is going to be a large expense which obviously impacts your net operating income.
  8. Expenses. You can ask what the annual expenses run, but it?s never an answer I have a lot of confidence in. I generally give the gross income a 40-50% haircut for expenses/vacancy depending on the age of the building.

Naturally you would need to ask questions designed to determine motivation. These really aren?t much different than questions you would ask about a single family home. And I would also ask questions regarding existing financing. Since it is 4 units it falls under the Garn St. Germaine Act.

This ought to get you started.

JPiper