Posted by Nate on March 14, 2001 at 12:17:14:
It’s okay, my mom sometimes calls me Nick too because her brother is named Nick…
I dunno, maybe they named me wrong or something? 
Anyway, glad I could help.
NT
$200,000 Deal… What do you think Ed? - Posted by Misty
Posted by Misty on March 11, 2001 at 18:09:00:
Ed,
Awhile ago I inquired about a $185000 deal but really didn’t think I could play with the big boys so I decided to play low. This past weekend I found out that I can get between 80-95% financing which makes me think of being in a different market (if the deal is good). What do you think about this offer that I’m going to give tomorrow?
Asking price: $200,000
Offering : $190,000
Borrow 80%: $152,000
Seller Carry: $38,000 (9%/2.5years) interest paid monthly
only, balance due at end of 30 months
Ask for Rebate $10,000
NOI is $8065/annual
8-unit apartment
$4200/monthly rent
$5000 taxes
$9300 utilities ( i will change that later)
This will give me a positive cash flow of about $675 before I change anything and that was estimating high with expenses.
Your opinion is valuable to me let me know!
Thanks,Misty
Re: $200,000 Deal… What do you think Ed? - Posted by Ed Garcia
Posted by Ed Garcia on March 13, 2001 at 02:12:06:
Misty,
No offence, but I don’t trust your numbers. Your gross income is $4200 a month.
$4200 divided by 8 units = $525 per unit, per month.
$4,200 X 12 months is = $50,400 If I just take 50% of the gross that would be $25,200. NOI.
At a 12 Cap. the property is worth 210,000.
Misty, why are you estimating expenses? Why don’t you get them from the previous owner?
Sorry Misty, we need better info,
Ed Garcia
Re: $200,000 Deal… What do you think Ed? - Posted by Nate
Posted by Nate on March 11, 2001 at 21:46:47:
You’re overpaying. NOI = $8,065. Purchase price = $190,000. That is a cap rate of 4.2%. Why not put the money in a savings account and earn the same return with no risk?
Nate
Ed, No Offense Taken… - Posted by MIsty
Posted by MIsty on March 13, 2001 at 05:49:29:
Ed,
First I just want to say that I am so glad that I found this site and that we have you guys to ask questions and sometimes bare our souls whether embarassing or not, I am in this for the long haul and have never been one to turn down constructive criticism, it’s how we all learn whether or not we take that opportunity or not. Any advice that you all give to me is greatly appreciated believe me! I bought the Sheets program in the middle of January since I have been off work for an injury and although I feel I learned a lot, this site actually gives me and others a place to actually learn hands on, just want to appreciate you you all for that…
Now as for the properties…
The guy has 2 for sale…
These are the numbers he gave me:
#1) 185,000 #2) 200,000
7 apartments 8 apartments
3300/monthly rent 4200/monthly rent
750/monthly util. 775/monthly util.
4200/taxes 5000/taxes
He is going to moving at some point of time, not right now so that’s not the urgency. Today I will call him and see about recent appraisals(although I will also do it myself) and see about getting more info like Nate suggested after I pulled up the due dilligence article(thanks Nate and Ray). It’s definitely a money maker and if I can make this happen I really want to believe me, the owner said already that he’d help with financing between 15%-25% for about 2 years which I would ask for 3 minimal. I drove by both places yesterday and liked the places but didn’t call the owner right yet, wanted to do that at home with my questions at hand. Both places have 4-5 garages, full basements with laundry(owner told me previously). Now the rest is up to me to gather the necessary information, I will keep you updated!
Thanks again Ed!
Misty
Re: $200,000 Deal… How about this NICK? - Posted by Misty
Posted by Misty on March 12, 2001 at 06:41:44:
I think that I over did my expenses…
Would it be a good deal if the NOI was more like $16000? I figured $9000 for management expenses because I live an hour and a half away but I could hire someone within to help up for a lot cheaper…
Thanks Nate, tell me what you think?
Misty
Re: $200,000 Deal… How about this NICK? - Posted by Nate
Posted by Nate on March 12, 2001 at 12:16:11:
Who is Nick?
Well, $16,000 would be better than $8,000 that’s for sure.
But I think your post raises a new and more-troubling issue: you don’t REALLY know what the expenses will be.
I would never go into a deal of this type, particularly not one 90 minutes away from me (where I would hopefully not be on site too often), without having a more solid idea of what the expenses really will be. Not based on what the seller tells you - but on your own analysis. Otherwise you could easily guess wrong and end up making no money, or worse having a negative cash flow.
I suggest you spend a little more time determining what the real operating expenses will be, before you do this deal. Ray has a good article on due diligence in the articles section of the site, which will give you some ideas of what to look for and how to look for it.
Good luck,
Nate
Re: $200,000 Deal… Sorry Nate… - Posted by Misty
Posted by Misty on March 12, 2001 at 16:43:17:
Thanks,
I am just trying to make sure I overestimate my expenses rather than underestimate them… But you’re right about the drive and I appreciate your honesty!
Thanks! Plus there are a ton more deals where I’m at, better to stick to the close ones…
Re: $200,000 Deal… Sorry Nate… - Posted by Nate
Posted by Nate on March 12, 2001 at 17:51:36:
I think you got my point, but just to make sure:
If you have to estimate, better to be on the safe side (agree with you there).
However, it’s better if you DON’T have to estimate - if you can get within a reasonable margin of error (5%-10%, not 100%!) of what the actual number will be.
Certainly you won’t be able to do that on every expense line item (maintenance, for one thing, depends on the tenants, the age of the building, and to some extent luck) but as far as taxes, insurance, management fee, utilities, and the like, you can be pretty close and had better be for your own sake.
Not necessarily saying to skip this one - just not to get into it without better data.
Good luck,
NT
Re: $200,000 Deal… Sorry Nate… - Posted by Misty
Posted by Misty on March 13, 2001 at 17:33:55:
Thanks again Nate!!!
Don’t know what is about Nick…
NATE… THANKS!
Re: $200,000 Deal… Sorry Nate… - Posted by Misty
Posted by Misty on March 13, 2001 at 17:33:13:
Thanks again Nick!!!