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MooseHead

MooseHead

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Aug 29, 2010
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Hi everyone, I`ve been trolling these forums the past few weeks learning lots. I figured I would introduce myself and fill you guys in on a real estate property I am interested in. It has been for sale for quite some time now and the price continues to be reduced. The property is a triplex (REO) and is listed at $82,500 currently.

My question is: the proforma supplied by the realtor does not show heatings costs, monthly rents, etc. Heating is a big concern for me as there is only 1 meter and therefore I would be paying for the utilities. It is also heated by a hot water boiler (pros/cons?). Can I ask to have this information supplied to me? And if so, how can I get these numbers? Tax report? I understand th proforma is only projected numbers and not the actual ones.

Any help would be great!

Cheers,

MH
 
I would ask to see the utility bills for the last year.

Michael

QUOTE (MooseHead @ Aug 30 2010, 03:38 PM) Hi everyone, I`ve been trolling these forums the past few weeks learning lots. I figured I would introduce myself and fill you guys in on a real estate property I am interested in. It has been for sale for quite some time now and the price continues to be reduced. The property is a triplex (REO) and is listed at $82,500 currently.

My question is: the proforma supplied by the realtor does not show heatings costs, monthly rents, etc. Heating is a big concern for me as there is only 1 meter and therefore I would be paying for the utilities. It is also heated by a hot water boiler (pros/cons?). Can I ask to have this information supplied to me? And if so, how can I get these numbers? Tax report? I understand th proforma is only projected numbers and not the actual ones.

Any help would be great!

Cheers,

MH
 
QUOTE (MooseHead @ Aug 30 2010, 02:38 PM) Hi everyone, I`ve been trolling these forums the past few weeks learning lots. I figured I would introduce myself and fill you guys in on a real estate property I am interested in. It has been for sale for quite some time now and the price continues to be reduced. The property is a triplex (REO) and is listed at $82,500 currently.
My question is: the proforma supplied by the realtor does not show heatings costs, monthly rents, etc. Heating is a big concern for me as there is only 1 meter and therefore I would be paying for the utilities. It is also heated by a hot water boiler (pros/cons?). Can I ask to have this information supplied to me? And if so, how can I get these numbers? Tax report? I understand th proforma is only projected numbers and not the actual ones.

Any help would be great!

Cheers,

MH

Yes ask for these facts from the realtor but much easier to get verification of these facts once an offer is in place.
This property may be a good buy, or not.
If you are intent on investing in RE first educate yourself, then decide on a strategy, an area, then once you find a potential property analyze it carefully. Remember you are not just buying a house you are buying into a neighbourhood. There may also be a lot of deferred maintenance and/or repairs required, need to determine that as well.
A hot water boiler if new or updated is usually a very effiecient heating system, particularly for large buildings.
 
QUOTE (MooseHead @ Aug 31 2010, 06:38 AM) Hi everyone, I`ve been trolling these forums the past few weeks learning lots. I figured I would introduce myself and fill you guys in on a real estate property I am interested in. It has been for sale for quite some time now and the price continues to be reduced. The property is a triplex (REO) and is listed at $82,500 currently.

My question is: the proforma supplied by the realtor does not show heatings costs, monthly rents, etc. Heating is a big concern for me as there is only 1 meter and therefore I would be paying for the utilities. It is also heated by a hot water boiler (pros/cons?). Can I ask to have this information supplied to me? And if so, how can I get these numbers? Tax report? I understand th proforma is only projected numbers and not the actual ones.

Any help would be great!

Cheers,

MH

Sorry to be so nit-picky, but I don`t think you have been "trolling" these forums - at least I hope not! According to Yahoo Answers: "A `troll` is someone who intentionally and persistently posts inflammatory messages about sensitive topics to bait users into responding or provoke a confrontation." I think you maybe have been "lurking".


Anyway, good luck with your purchase!

Nicola
 
QUOTE (MooseHead @ Aug 30 2010, 05:38 PM) Hi everyone, I`ve been trolling these forums the past few weeks learning lots. I figured I would introduce myself and fill you guys in on a real estate property I am interested in. It has been for sale for quite some time now and the price continues to be reduced. The property is a triplex (REO) and is listed at $82,500 currently.

My question is: the proforma supplied by the realtor does not show heatings costs, monthly rents, etc. Heating is a big concern for me as there is only 1 meter and therefore I would be paying for the utilities. It is also heated by a hot water boiler (pros/cons?). Can I ask to have this information supplied to me? And if so, how can I get these numbers? Tax report? I understand th proforma is only projected numbers and not the actual ones.

Any help would be great!

Cheers,

MH

Moose Head,

Ed raises some very good points. You definitely want to do you research with regards to this property.
In your trolling/lurking have you learned about the Property Goldmine Scorecard?
If not, you should begin there by learning about this first.

In relation to your question, I agree with the previous recommendations, get utility bills from previous years. This will help to paint a clearer picture. Don`t stop there...get a second and third opinion on the estimated cost of the utilities. It is better to find out the correct information at the very beginning. As Ed said, it is often easier to get information such as this (utility bills) once you have an offer in place.
 
Thanks everyone for the responses and advice. I will post up more info with regards to the property once I find some time!

@ Nicola - yes I meant to say lurking and not trolling. Thanks for clearing that up!

Cheers,

MH
 
Hi MH
The advice above is good
To add - Do not trust the pro-forma`s supplied by the realtor
Look through each line item - and each possible missing line item - (grass cutting? landscapping? eavestrough cleaning? common area cleaning? salting? snow clearing? Random vandalism repair? property management? advertising? re-rental costs? vacancies? etc,,) and try to create your own pro-forma... chances are your expenses will be much higher than listed. Will your property tax increase based on higher valuation of property in a few years? Do repair costs cover the need for periodically painting, replacing worn items, etc...?
 
I`ve looked around online for the Property Goldmine Scorecard as well as on the forum but with no luck. I did find out it was in Dons Campells book: Real Estate Investing in Canada so I plan on ordering it sometime today.

You guys also mentioned that it is easier to get information with regards to utilities/taxes/rents etc. once an offer is in place. Can someone explain to me why that is? I assume the seller is more apt to provide those details once they know you are serious?

Cheers,

MH
 
QUOTE (MooseHead @ Aug 31 2010, 11:33 AM) ..You guys also mentioned that it is easier to get information with regards to utilities/taxes/rents etc. once an offer is in place. Can someone explain to me why that is? ..
make it part of your offer on an investment property that seller provides you with THREE YEARS of history on the property as it relates to
a) rent
b) utilities
c) taxes
d) maintenance items

Usually the offer is subject to
i) financing satisfactory to buyer, and
ii) property and document inspection satisfactory to buyer

Then verify this information .. and waive conditions only once financing is in place and numbers are realistically assessed and make sense to you !!
 
QUOTE (ThomasBeyer @ Aug 31 2010, 03:10 PM) make it part of your offer on an investment property that seller provides you with THREE YEARS of history on the property as it relates to
a) rent
b) utilities
c) taxes
d) maintenance items

Usually the offer is subject to
i) financing satisfactory to buyer, and
ii) property and document inspection satisfactory to buyer

Then verify this information .. and waive conditions only once financing is in place and numbers are realistically assessed and make sense to you !!

Thanks Thomas for the great advice. Will an REO property owned by the banks still be willing to offer this information? Also, I am "informally" pre-approved for a mortgage but I go in for an appointment tomorrow to discuss mortgage options and possibly get formally pre-approved with a certificate. Any advice? Variable or fixed? Opinions?

I am hoping my financial advisor at the bank will fill me in on the pros/cons but I would value a 3rd parties opinion even more (Knowledgeable REIN members!).


Cheers,

MH
 
QUOTE (MooseHead @ Aug 31 2010, 04:20 PM) Thanks Thomas for the great advice. Will an REO property owned by the banks still be willing to offer this information? ..
a bank may not have this info .. and they sell it "as is .. where is" .. thus YOU have to make prudent asumptions on rents, taxes and expenses .. and the best educator is
a) experience or
b) an appraiser or
c) a person that owns similar assets

The other person on your team is a property manager that manages the asset impeccably once you own it. Who is this person ? If it is you, you may not be ready yet to buy (this piece of) real estate !
 
QUOTE (ThomasBeyer @ Aug 31 2010, 06:42 PM) a bank may not have this info .. and they sell it "as is .. where is" .. thus YOU have to make prudent asumptions on rents, taxes and expenses .. and the best educator is
a) experience or
b) an appraiser or
c) a person that owns similar assets

The other person on your team is a property manager that manages the asset impeccably once you own it. Who is this person ? If it is you, you may not be ready yet to buy (this piece of) real estate !

Thanks again Tom. Yes I do plan on being property manager (I also plan on living in the main floor unit). I am currently renting and looking for a property to call my home as well as an investment. As far as me being ready to buy from a knowledge stand point of view, I think most here would say no. I believe there are many if not most who are more knowledgeable than I am at investing. The fact that I have not yet been a home owner and gone through the process of acquiring a property is also a big lack of experience. However, I am more than ready financially and think my best way to learn is get involved. I am debt free and have money saved up for a down payment.

I already have co-workers who would be interested in becoming tenants. Being in law enforcement, I know they to have a solid income and their backgrounds are obviously clean. I also worked as a carpenter apprentice for 2 years specializing in multifamily home renovations before my current job and have the skills/tools to do some major renovations myself.

I will be going by the property tomorrow with the realtor again to check out a few more things. I will keep you guys updated and hope to keep receiving some advice!

Cheers,

MH
 
QUOTE (MooseHead @ Aug 31 2010, 07:13 PM)
... However, I am more than ready financially and think my best way to learn is get involved. I am debt free and have money saved up for a down payment.



I already have co-workers who would be interested in becoming tenants. Being in law enforcement, ..


you're probably ready then !!



GO FOR IT .. but don't overpay !



Related posts:



5 ways to make money http://myreinspace.com/public_forums/General_Discussion/61-3347-5_ways_to_make_money.html

Do what you love: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-16722-Love_what_you_do_-_Do_what_you_love_.html

How to get started http://myreinspace.com/public_forums/General_Discussion/61-4391-How_to_get_started_.html
 
Well I`ve gone ahead with an offer on the property. My offer was $62,500 ($20,000) off the asking price. Many factors went into the offer such as the amount of time it has been listed, what the property has sold for previously, and the amount of work and $$ I determined it needed.

If I weren`t to be living in the property, and I factored in a total investment of $80,000 after renovations, it fits into the cashflow zone as follows:

1 bdr apt - $450
1 bdr apt - $550
2 bdr apt - $800

Rent numbers are taken from research I`ve done from local classified adds over the last month as well as personally visiting rental units. The numbers listed here are also quite lower than market rents in the area, and with some good marketing and recently renovated units, I`m sure I could increase these numbers quite a bit. Utilities included.

Gross monthly rent: $1800 x 12 = $21,600

Works out to 27%

Even with me living in the main unit my cashflow zone percentage is 15.



The property had 7 checks on the goldmine scorecard with a possibility for more. However, there are some questions that I have yet found answers to.

Expenses are approx. as I do not have access to rent rolls/utility bills being an REO therefore I am limited the proforma provided. I also used figures from similar rentals in the area and tried to come up with numbers that would likely be higher than the actual cost to be safe.

taxes - $2200
electricity - $2500
w/s tax - $1000
heat - $2500
insurance - $1500
repairs/maintenance - $2000

total = $11,700

mortage:

15 year amortization on $80,000 at 8% (again a high rate just to be safe)

= $758 monthly

= $9096 yearly

$11,700 + $9096 = $20,797 in expenses


Works out to be about $800 of positive cashflow a year. Keeping in mind I likely have expenses much higher than what they actually cost, rents lower than what I feel I can get, and a 15 year amortization at 8%. All of that and it still produces positive cashflow.

If I look more towards 25 year amortization at 5% (more reasonable) and reduce my expenses and increase the rents to where I believe they can be my yearly cashflow works out to:

total expenses: $9000
Mortage payments: $5580

= $7020 net.

Anyways, sorry for the long post. I figured I`d put some number crunches in here to get some feedback from you seasoned investors who have much more experience than I do.

Cheers,

MH
 
Hello!

It looks as though you`ve put an offer in on the property so I assume you found the property goldmine scorecard? Just to let you know that it is posted in the forums here, under the due diligence forms in the members only section. Also, if you are a Rein member you would have received it in one of the binders you got when you signed up! Just wanted to let you know. Good luck with the triplex!

QUOTE (MooseHead @ Aug 31 2010, 11:33 AM) I`ve looked around online for the Property Goldmine Scorecard as well as on the forum but with no luck. I did find out it was in Dons Campells book: Real Estate Investing in Canada so I plan on ordering it sometime today.

You guys also mentioned that it is easier to get information with regards to utilities/taxes/rents etc. once an offer is in place. Can someone explain to me why that is? I assume the seller is more apt to provide those details once they know you are serious?

Cheers,

MH
 
Hi Calgary, thanks for the reply.

I ended up getting Dons book Real Estate Investing in Canada, along with 97 tips and 87 tax tips for Canadian Real Estate Investors as well so I`ve got some reading to do.

Cheers,

MH
 
...... and while you`re reading......join REIN...you won`t regret it. I`ve been a member for 5 years. It keeps you up to date with all the ongoing changes that happen, without having to do anything but attend meetings and mingle with like-minded real estate investors.
 
I would certainly like to do that sometime in the future. No $$ set aside for that at the moment. Maybe I`ll make a REIN member fund jar and put a little bit of $$ into it every paycheque!

Cheers,

MH
 
Anyone get a chance to look over the numbers? I know it`s a long post but if you do, let me know what you think! I would appreciate it greatly.

MH
 
QUOTE (MooseHead @ Sep 10 2010, 09:52 PM) ..

Works out to be about $800 of positive cashflow a year. ..
Your expenses sound about right .. but with rents THIS LOW I wonder: where is this ? rural BC, AB or ON ? Do you currently live there ? Rents are this low ?

Can you raise rents as folks live there today ?

Does this sound like a great investment to you ? $800 cash-flow a year for an $80,000 investment ? This doesn`t count property management if you decide to move out.
 
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