OfflineThursday I am going to look at a 4 plex that I've been looking at for a while. Everytime I rode by and saw that for sale sign, I kept saying I'll call on that tomorrow. Well I finally called and talked with the owner and he gave me this information that I want to share and see what you experts think.
There are 4 units, 2 are rented @ $350, 1 @ $450 and the other he is working on will be $400 and is now vacant.. That's a total of $1200/month. He owns it free and clear, and is asking $142.5. I asked what the difference was in the rents and he didn't give a straight answer. He said some of the people had a hard time making payments and sometimes when they moved in he would let them do sweat equity (sort of like Jim does) and they would actually clean up the place and he would lower the deposit. He said he had one tenant who was always late but she always paid. I asked if it was Section 8 and he said no. I'm thinking it should be. What is so strange to me is this apartment complex is in a great neighborhood. There are lots of really nice duplexes around, and some nice homes. All I've seen so far is the outside and the blinds are all bent up and the doors need painting. Otherwise it would look good on the outside since it's brick. If all the landlords would get together and try to fix the place up, they could get some good tenants in there and raise the rents. He said there is one apartment he has never been in since it was rented to the same person 2 years ago. He does his own management of the apts. The HVAC is over 10 years old. He said he is selling because he has another project he is working on. He has some houses for rent also and I asked him if he would be willing to do lease options on those. He said he never thought about it so when I go look at the apartment tomorrow, I'm going to talk to him about it. I'm also going to go without him and see if I can talk to the tenants before I do anything just to make sure there is not something he is not telling me.
Oh, another thing... I asked him about the maintenance costs and all he said was, "well, you know the usual stuff, it varies, and it's always something". DUH!! I want numbers! Isn't there a guide sheet I can use for apartments? I want to ask all the right questions and see if I get the right answers. Any help is welcome and very much appreciated.... and NEEDED>>>> lol
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
AKA Financials on the property for the last 2 years. If he's managed the property this whole time, he should have good records. Let him know for you to make an educated decision to purchase his property, you need to see how the property is performing now, and in the past 2 years. It can be on a spreadsheet, word doc, or whatever, and it will include cost for each apartment, rent amount, income, NOI, and other pertinent details. You don't need to know in detail all that was fixed, but if something like an A/C unit was replaced or appliances were replaced ~ any major item was replaced or installed you should know about, esp. the roof(s). I had a quesitionare I used to use, I might send it over or post it somewhere. It may or may not help you with this, but this is a start.
There are 4 units, 2 are rented @ $350, 1 @ $450 and the other he is working on will be $400 and is now vacant.. That's a total of $1200/month. He owns it free and clear, and is asking $142.5. I asked what the difference was in the rents and he didn't give a straight answer. He said some of the people had a hard time making payments and sometimes when they moved in he would let them do sweat equity (sort of like Jim does) and they would actually clean up the place and he would lower the deposit. He said he had one tenant who was always late but she always paid. I asked if it was Section 8 and he said no. I'm thinking it should be. What is so strange to me is this apartment complex is in a great neighborhood. There are lots of really nice duplexes around, and some nice homes. All I've seen so far is the outside and the blinds are all bent up and the doors need painting. Otherwise it would look good on the outside since it's brick. If all the landlords would get together and try to fix the place up, they could get some good tenants in there and raise the rents. He said there is one apartment he has never been in since it was rented to the same person 2 years ago. He does his own management of the apts. The HVAC is over 10 years old. He said he is selling because he has another project he is working on. He has some houses for rent also and I asked him if he would be willing to do lease options on those. He said he never thought about it so when I go look at the apartment tomorrow, I'm going to talk to him about it. I'm also going to go without him and see if I can talk to the tenants before I do anything just to make sure there is not something he is not telling me.
Oh, another thing... I asked him about the maintenance costs and all he said was, "well, you know the usual stuff, it varies, and it's always something". DUH!! I want numbers! Isn't there a guide sheet I can use for apartments? I want to ask all the right questions and see if I get the right answers. Any help is welcome and very much appreciated.... and NEEDED>>>> lol
Welcome to the world of being a landlord. Reading over your post I will try to lend you some pointers. Jeremy and I own all multi's and your question about maintainence is valid. The bigger the prop the more things can need repair, such as dripping faucets that cut into your cash flow, toilets that take forever to fill.slow moving drains, roof repairs, water heaters,furnaces, any and all other maint. related issues, that will eat away at your cash flow. On one hand the seller is right "The usual stuff, it varies".
If the seller is organized and uses quarterly spreadsheets as we do, you can pinpoint month by month what you are spending money on and for what. The more props you acquire will give you more maint. issues. Then come the codes inspectors who will look at items you thought were fine and then tell you to fix it--Result more cash flow going down the toilet. Then we have snowplowing here in upstate NY where we measure snow by the foot, not by the inch!!--Result, more cash flow gone.
What I am trying to tell you is that buy and holds are a great way to build residual income but you need to price your rents so that you can be ready for any and all surprises that will come your way and they will.. We set our rent schedules so we are netting at lease $250 to $350 per unit.
When crunching numbers on this deal, make sure you are making enough to cover your maint costs at all times. Looking at your possible rents here does not give you much cash flow, although any cash flow is good, you have to make enough to cover. Hope this helps you put a deal together...Jan
Great info from Jan and one thing to add, when figuring out the prices to fix things, 1. are you able to do any of the work yourself, 2. do you need to pay a professional, or 3. do you have a handyman that will do it all for you for less then the pro? Good luck with it!
SEMPER FI
GET SOME!
If you have Deans books(BAREM)I think, he writes about a four plex or so and how he worked an owner finance for a short period and ballooned the payoff while improving the property and raising the rents.
Mike
https://tvallc.isrefer.com/go/RehabLite/renvestr/ Free tools
Thanks guys... all good information that I needed to know. However, I am not going to be the landlord. I'm going to assign it, but I still need to know all this in order to present the details to an investor. This guy seems to be very unorganized and I doubt he even has a P&L statement... just saying. I was supposed to look at it today, but he said he got involved in somthing else and postponed it until next week. He's had this thing for sale for months, so I guess he figures what's a few more days.
Dallas, if you could send that questionnaire to me, that would be very helpful. THank you so much. I appreciate all tips and pointers I can get.
Jan, those were all good pointers that I'm sure I'll need when the time comes for me to buy and hold... and for me to be able to talk intelligently to an end buyer now. As a matter of fact, I'll be taking notes and put them in my little black book..
Thanks so much. I appreciate your taking time to post.
Jack, those are good things to remember too. I have a few skills when it comes to cosmetic stuff, but I would definitely have to hire a professional for the other stuff. Thanks for your input. I appreciate it greatly.
Mike, that would be great if he would owner finance, but I think the main reason he wants to sell it is because he has tried to do all the maintenance and management himself and let it get in bad shape and now he just wants out... my opinion only... he didn't say that. After I look at it, I'll know more about the repairs and what to offer. Thank you very much for your advice. I appreciate you.
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
sent you a PM regarding this 4-plex.
Always Looking to Acquire Houses | Always Looking to Amaze Investors
at this 4 plex today. I rode over in the evening just to look in the window of the only vacant one. There was a guy outside at his car and he asked me if I was going to move in. I told him I was thinking of buying it. I also asked him what he paid per month and he said 3(stall)50. I said oh, is everybody paying that. He said yes, but the other buildings were owned by someone else and they all paid more. That was a given when I looked at the rest of the 4 plexes and then looked at this one. It looks like they all have been pretty much trashed... All 4 doors are in bad need of paint, one had its windows used as a shelf for stuff animals and the others had broken blinds. Even the parking lot in front of this building was trashy....no pride there at all!!!! Next week when I look at the inside of the vacant one, I'll probably get a pretty good idea what the others look like.
Bill, I sent you a PM.. Hope we can touch base tomorrow.
Shirley
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
Hello!
I think a Schedule E is the tax form for the repairs.
What should the rents be? This info should be for your end buyer. Like the others said, you want to have some sort of cushion and profit.
Any chance that you know of a handyperson that would be willing to go with you when you check out the vacant unit?
In my area, for rentals, we get to pay for licenses and inspections. You could consider checking with the inspection department to see if any permits have been pulled. When you look at the place, you can try to keep an eye out for recent repairs and check your list to see if there was a permit for it.
I, as a landlord, am allowed to do some general construction. Anything that would require an electrician, plumber, HVAC, roofer, etc I'm not supposed to do and a permit and inspection is required to make sure everything is to code.
The reason why I mention this:
It appears that we bought a duplex from someone that I was familiar with (a customer from my former workplace) and the repairs were done by the former owners friends (according to the neighbor). In the excitement of purchasing our first property, I didn't look at the finer details. After hiring a plumber to come in and fix the leaks from the other repair jobs, it appears that the former owners buddies weren't exactly pros (I hope). The little things are starting to jump out at me.
Good luck.
The more thorough the question, the more thorough the answer.
Please fill out your profile with as much info as you're comfortable with.
Thanks.
I believe this guy is not a pro in anything but tried to do everything.. from the way the apartment building looks, he didn't do much at all. I'm sure it will need some major stuff if the truth were known.
Thanks, I'll remember that!
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
I think a Schedule E is the tax form for the repairs.
What should the rents be? This info should be for your end buyer. Like the others said, you want to have some sort of cushion and profit.
Any chance that you know of a handyperson that would be willing to go with you when you check out the vacant unit?
In my area, for rentals, we get to pay for licenses and inspections. You could consider checking with the inspection department to see if any permits have been pulled. When you look at the place, you can try to keep an eye out for recent repairs and check your list to see if there was a permit for it.
Chris, when you say check with the inspection department, do you mean at the county courthouse?
I, as a landlord, am allowed to do some general construction. Anything that would require an electrician, plumber, HVAC, roofer, etc I'm not supposed to do and a permit and inspection is required to make sure everything is to code.
The reason why I mention this:
It appears that we bought a duplex from someone that I was familiar with (a customer from my former workplace) and the repairs were done by the former owners friends (according to the neighbor). In the excitement of purchasing our first property, I didn't look at the finer details. After hiring a plumber to come in and fix the leaks from the other repair jobs, it appears that the former owners buddies weren't exactly pros (I hope). The little things are starting to jump out at me.
Good luck.
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
When you say inspection department, do you mean at the county courthouse?
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
Find out who the inspector is for your city. This is what he's talking about.
Thanks Dallas.
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
Ok. I attached the Apartment Questionaire to a new post. Please feel free to do what you want with it. I used this when trying to buy commercial multi-family apt. complexes big and small, 3 yrs. ago.
So, you can find it here:
http://www.deangraziosi.com/real-estate-forums/buying-foreclosures-reos-...
Thank you again.
Everything works out in the end. If it hasn't worked out, it's not the end.
You have not lived a perfect day, unless you have done something for someone who will never be able to repay you. Ruth Smeltzer
It is what it is 'til you change it.
Hello!
It's been a while since I last checked this thread. For one of my rentals in one city, the inpection department with the inspectors is a couple of miles away from other city buildings such as the one I go to pay the water bill. For the duplex mentioned above, it's in another city. In that other city, I can pay the water bill as well as talk to that city inspector in the same building.
Check the phone book for that city. For our first property, the one mentioned above, we can go into the inpection department and talk to an inspector anytime during normal business hours. For our second property, the one mentioned in this thread, if we want to talk to an inspector (electrical inspector for example), I can go talk to him from 7:30 - 8 or from noon to 1.
You want to have the inspectors/ inspection department on your power team. Sure you can do repairs without their knowledge but there's a chance that you could get screwed from your contractor and the repair not be up to code. Also you'd run the risk of the inspector finding out and you could get on their bad side. You don't want to be on the bad side of the inspectors - that may prove expensive in the long run.
The more thorough the question, the more thorough the answer.
Please fill out your profile with as much info as you're comfortable with.
Thanks.