RE rookies

General Real Estate Investing
1

My husband just retired but needs income, We found 82 units , 2,229,000 near a school. I don’t think he charges enough rent for 2-3 bedroom apts, he only charges 400 435. He gets 35,000 rent mthly but should get at least 38,000 which would be 1,900.000 if I x50. Is this about all you would give for this? We planned on property managing ourselves partly and my husband was a maintenance man for years, Does this sound like a good deal for you if we could structure it?

Estimated Annualized Operating Data Year One Year Two Year Three Year Four

Scheduled Income $411,240 $423,577 $436,284 $449,373
Other Income $9,575 $9,862 $10,158 $10,463
Collection Losses ($4,112) ($4,235) ($4,362) ($4,493)
Less Vacancy $20,562 $21,179 $21,814 $22,468
Gross Operating Income $396,141 $408,025 $420,266 $432,875
Less Expenses $189,609 $196,038 $202,701 $209,605
Net Operating Income $206,532 $211,987 $217,565 $223,270
Less Loan Payment $147,772 $147,772 $147,772 $147,772
Pre-Tax Cash Flow $58,760 $64,215 $69,793 $75,498
Cash on Cash Return 11.75 % 12.84 % 13.96 % 15.10 %

2

If I could get this for 1,900,000 wouldn’t I be getting it for 23,900 a unit? Seriously what is the highest you would go and what would closing and inspections look like money wise?

3

Can you get a loan for this amount? Do you have any rental experience? The cash flow per unit is only $59. I like to have a cash flow of $100 per unit per month.

Mike

4

I could get the money but is the 59.00 a unit on giving 1,900.000? Would you consider this is you could do alot of maintenance yourself or let it go, even if you could raise rent 3000. mth. Thanks for your honesty. I have some family with w experience but don’t want the property unless we could live on this income or my husband anyway. How did you arrive at 59.00 if its okay to ask sir? Thanks soooo much

5

When you retire the goal is too minimize your financial risks (ask any financial advisor). You are getting into real estate which is EXTREMELY risky for new investors. On top of all the risks, you are looking at buying a large apartment building as your first purchase. Even a seasoned investor would have their hands full on a purchase of this size. You will be completely lost.

Basically it does not matter what the numbers are. You and your husband are in or close to retirement. Trying to manage an 82 unit apartment building as your first rental is the very last thing you should do.

6

I say if you can get a great deal on the building and it makes perfect economic sense for you and your husband to buy it, go for it.

How long has the property been listed or for sale? Is the seller motivated and how long has the seller owned the buidling?

7

I wonder if they purchased the property?

8

82 units is an awfully big bite for anyone without lot of rental experience.

If you can increase the income with some hard work and good management. YOU DO NOT PAY THE SELLER IN ADVANCE FOR THE VALUE YOU ARE GOING TO ADD WITH YOUR HARD WORK!!!

Here is the biggest danger I see with this purchase: 82 units might very well be filled with undesirable tenants, and you are going to have to get rid of them and replace them with better tenants. That means a lot of vacancies the first year. Can you carry the property if it is 30% vacant?

I’ve heard of apartment buildings where 100% of the tenants had to be kicked out and replaced. Can you manage that?

Almost always the new owner must deal with a lot of deferred maintenance. That raises expenses considerably the first year. Do you have the funds to cover that?

I have no idea whether or not the value is there for the price. But if you don’t have any income to make up a shortfall, or you can’t come up with the money to carry the building if you have to, then it is too big a purchase for you.