to flip. I was hoping some of you guys could critique and give any ideas you might have. Ive already talked to some of you.
multi family property, commercial zoning. 4 units. 1 large office, 2 large 2br/bath, 1 small 1br/b.
Possible rents per month of 1850. The only costs are taxes, insurance, and repairs.
Taxes 2499, insurance guestimate 1000
new roof, new wiring, new kitches, new brs, all repairs done, move in condition. Great location.
Asking price was 170k but I talked her down to 155k. Ive done basic calcs to determine its not a horrible deal but Id be interested in other opinions and why. Thanks ~
Looks like your payment would be about $1100 a month plus taxwes, insurance , maint. Looks like some cash flow there.
P&I ($155K @8%) $1,137
Management (@7%) 130
Vacancy (@5%) 93
Kinda thin at best…
Also, you note “possible rents per month of 1850”…what are the real rents? It is rarely a good idea to base a buy/don’t buy decision on proforma numbers, especially for a new investor.
Just muy 2 cents…
probably, based on the lower rents.
Tell her you “partner” said $155k was too high for him. Offer her $130k. ;D If she doesn’t take it walk away, maybe she’ll change her mind in a month. $100 cashflow if you’re lucky is too darn thin for me.
If you subtract out the management costs and manage it yourself, it will put a little extra coin in your pocket.
At $1850/month X 12=$22,200
All costs - management fees are $1528/Month X 12=$18,336
That gives a DSCR of 1.21, which is not to shabby. However I agree with the other posters. Offer less money and be prepared to walk.
I appreciate all of your posts. I met with her today and told her my partner would be VERY interested if she would accept 130k and she declined. Since the apartments are vacant (because of the full renovation) I told her that she should rent the apartments to offset the taxes and insurance, (she owns them outright), and I mentioned I may be willing to manage them for an 8% fee. She said she would call me back this afternoon so we will see where this goes. Its a really nice place and the building is in great condition. I have no doubt it could make someone a lot of money in the right situation.
Whether or not she wants help managing the property, its off to the next deal ~/~
Well your offer is on the table, she might have declined it now but in a month or 2 after it sits there with no calls she might take it or come to something in the middle. If not keep your eyes open and a more lucrative deal will come along.
<<If you subtract out the management costs and manage it yourself, it will put a little extra coin in your pocket.>>
Why would you do it for free? IMO, you still need to count on managment fees to either pay yourself or have the ability to pay someone else if something happens to you…
This is not far from saying, “You can subtract out the vacancy factor if you keep it full”…
PS – for some of you (and you know who you are), this is a joke --OK?
You have a valid point regarding the management fees. I just figured since it was a small 4-unit building he could pay himself the management fees and put more money in his pocket. Also, even for those of us not in the know; that was funny.
…if you are managing properties for free, let me know…I have some you can practice on!
-.^ Khas, maybe you could share with me what all you look for in properties. How much cash flow, locations, any turn offs, just whatever?
I look for:
3 bedroom (will take the right 2 bedroom)
1000+ square feet
In the parish that I live in (better schools, lower crime, etc.)
A minimum of $125 a month cashflow ($1,500 a year)
We look for properties that are in need of “heavy cosmetics”…not full rehabs.