PLease Give me your feedback with this deal!

JasonEtheridge

New Forum Member
Registered
I could really use fellow member’s feedback with this.

The property is a legal non conforming 6 plex in a great area in a Top 10 town.
It has 6 good sized 2 bedroom apartments. 2 apartments per floor.
This property was originally a house when it was built in 1920, it has been a 6 plex since 1940.
Purchase price is 420k

Here are the numbers. They have been rounded.

Property Tax 5400
Insurance 2000
Hydro 6600
Gas 4000
Snow/garbage removal 1200
Maintanence 3000
Water/sewage 1800
Property Management 4960
Vacancy 3100

Expenses $32 060

Gross is $62 000

Property needs 25k in work to make it great. I have quotes .
I am putting 20% down and can get a residential rate mortgage of 3.79% fixed 4 years.
The roof was re done last year. Some windows replaced. 7 separate meters, all new electrical. Some new plumbing, but a lot will need to be replaced as it iron.
The units condition: 2 are fair with long term tenants, 2 are good, 2 are renovated.
Large lot.
Currently rents are at market but include hydro... so I guess one could say they are slightly below market. As tenants move out, new rents will not include hydro.
Home inspection showed us there was very little to no insulation in the attic! Insulation will be added which should lower the gas bill.
The building is fire coded with a fire alarm system. Heat sensors etc...overkill, but its there.
I really like this property, I love the street and it s close proximity to downtown, the lake, and transit.
This place will cash flow, and I like the appreciation potential.

I would really like your feedback on this.
Thanks for reading.
 

JasonEtheridge

New Forum Member
Registered
QUOTE (JasonEtheridge @ Sep 27 2009, 03:46 PM) I could really use fellow member’s feedback with this.

The property is a legal non conforming 6 plex in a great area in a Top 10 town.
It has 6 good sized 2 bedroom apartments. 2 apartments per floor.
This property was originally a house when it was built in 1920, it has been a 6 plex since 1940.
Purchase price is 420k

Here are the numbers. They have been rounded.

Property Tax 5400
Insurance 2000
Hydro 6600
Gas 4000
Snow/garbage removal 1200
Maintanence 3000
Water/sewage 1800
Property Management 4960
Vacancy 3100

Expenses $32 060

Gross is $62 000

Property needs 25k in work to make it great. I have quotes .
I am putting 20% down and can get a residential rate mortgage of 3.79% fixed 4 years.
The roof was re done last year. Some windows replaced. 7 separate meters, all new electrical. Some new plumbing, but a lot will need to be replaced as it iron.
The units condition: 2 are fair with long term tenants, 2 are good, 2 are renovated.
Large lot.
Currently rents are at market but include hydro... so I guess one could say they are slightly below market. As tenants move out, new rents will not include hydro.
Home inspection showed us there was very little to no insulation in the attic! Insulation will be added which should lower the gas bill.
The building is fire coded with a fire alarm system. Heat sensors etc...overkill, but its there.
I really like this property, I love the street and it s close proximity to downtown, the lake, and transit.
This place will cash flow, and I like the appreciation potential.

I would really like your feedback on this.
Thanks for reading.

Forgot to add...mortgage payment $1730/month or $20760/year
Down Payment and closing costs 91k
 

Thomas Beyer

Senior Forum Member
REIN Member
QUOTE (JasonEtheridge @ Sep 27 2009, 02:46 PM) ..
Purchase price is 420k
..
Gross is $62 000..
might be a good deal @ 70/door ..

What province ?

What CAP rate would CMHC use to underwrite if commercial ?

if you get an 80% mortgage at sub 4% it is probably a good enough deal !!!

Can it be well managed by you or a 3rd party ?
 

invst4profit

New Forum Member
Registered
What do you figure the time line to be to get all tenants on meters.
Have you considered a conditional offer based on vacant occupancy. This could take you a couple of months to re-rent but is commonly done.

To speed up tenant rollover you could evict one tenant for personal, or family member use, then reno and move to the next unit until all tenants are new and on meters. This would be slow, could take 3 years to do the entire building legally (semi).
 

Nir

New Forum Member
REIN Member
Jason,

Congrats, a Very Good deal!

My only comment is due to the age of the building and the fact you plan to hire a property manager, assume maintenance and repair costs to be $5000, not $3000.

Neil
 

manojsingh

New Forum Member
Registered
Jason,
It all depend on the area. If it is in appreciable area this is good deal but of this is in OK appreciable area its not because your maintenance cost will be very high because of the age of the building. How is the vacancy and what type of tenant you are getting will be deciding factor.
 

JasonEtheridge

New Forum Member
Registered
QUOTE (thomasbeyer2000 @ Sep 27 2009, 09:43 PM) might be a good deal @ 70/door ..

What province ?

What CAP rate would CMHC use to underwrite if commercial ?

if you get an 80% mortgage at sub 4% it is probably a good enough deal !!!

Can it be well managed by you or a 3rd party ?

The property is in the North Ward in Orillia.
I have a PM (EPM) who manages a few other properties and does a great job.
CMHC is looking at 7.5 cap rate for solid buildings in this area.
Thank you for your feedback.
 

JasonEtheridge

New Forum Member
Registered
QUOTE (invst4profit @ Sep 27 2009, 09:52 PM) What do you figure the time line to be to get all tenants on meters.
Have you considered a conditional offer based on vacant occupancy. This could take you a couple of months to re-rent but is commonly done.

To speed up tenant rollover you could evict one tenant for personal, or family member use, then reno and move to the next unit until all tenants are new and on meters. This would be slow, could take 3 years to do the entire building legally (semi).

I ll have 2 units vacant upon possession. Past experience leads me to believe I may lose a couple more when new management comes in.
Other than that, I ll have to wait until they leave.
Thanks for the input.
 

JasonEtheridge

New Forum Member
Registered
QUOTE (investmart @ Sep 27 2009, 10:10 PM) Jason,

Congrats, a Very Good deal!

My only comment is due to the age of the building and the fact you plan to hire a property manager, assume maintenance and repair costs to be $5000, not $3000.

Neil

That is the thing that makes me hesitate...the building has been well maintained. The immed improvements Im doing will remedy issues found in the home inspection. The building is very solid. The foundation is old stone and 2 feet thick, then its double brick all the way up.
If all new....plumbing, electrical, windows, boiler, roof, water lines from the city to the house redone, etc.....solid bones, brick construction...aside from the units needing what units need after a tenant leaves...what else should I expect to happen?
 

Nir

New Forum Member
REIN Member
QUOTE (JasonEtheridge @ Sep 28 2009, 07:47 AM) That is the thing that makes me hesitate...the building has been well maintained. The immed improvements Im doing will remedy issues found in the home inspection. The building is very solid. The foundation is old stone and 2 feet thick, then its double brick all the way up.
If all new....plumbing, electrical, windows, boiler, roof, water lines from the city to the house redone, etc.....solid bones, brick construction...aside from the units needing what units need after a tenant leaves...what else should I expect to happen?

If I told you it is going to be $5,000 (assuming you believed me:) would you not buy this Great 6-plex!? of course you would as it still generates good net income. so why waste your time thinking about something that does not affect your decision. It`s just an estimate anyway whether 3K or 5K and you`ll have a much better idea/estimate after owning it for 1-2 years. (BTW 5K is for an average building that age but if you know it is in a much better condition then you are correct its expected maintenance costs are lower, perhaps 20% less).
 

JasonEtheridge

New Forum Member
Registered
QUOTE (investmart @ Sep 28 2009, 07:52 PM) If I told you it is going to be $5,000 (assuming you believed me:) would you not buy this Great 6-plex!? of course you would as it still generates good net income. so why waste your time thinking about something that does not affect your decision. It`s just an estimate anyway whether 3K or 5K and you`ll have a much better idea/estimate after owning it for 1-2 years. (BTW 5K is for an average building that age but if you know it is in a much better condition then you are correct its expected maintenance costs are lower, perhaps 20% less).

I guess I always get a little nervous before releasing conditions...who doesnt!

Thanks all for your input.
 

Nir

New Forum Member
REIN Member
You`re welcome Jason,

I read your inspiring success story and wanted to ask if you can share who your appraiser was in Orillia?

I own a Plex there about to purchase another one..

Thanks.
 

JasonEtheridge

New Forum Member
Registered
QUOTE (investmart @ Sep 28 2009, 07:53 PM) You`re welcome Jason,

I read your inspiring success story and wanted to ask if you can share who your appraiser was in Orillia?

I own a Plex there about to purchase another one..

Thanks.

I ve used BArry PAge, he works out of the remax office owned by the Stoutts. Others have been provided by the lenders. I had no say with them.
 
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