When looking at operating expenses on a property, you have both controllable expenses and non-controllable expenses. Controllable expenses are things like repairs and maintenance, property management fees and other expenses that you can have most authority over. On the other hand, expenses like Taxes and Insurance are based on outside factors, like a county assessor …
When you start to learn a new market, some of your best insight will likely come from the locals who work and live there. If you live somewhat far from these out of state markets, you will need to get yourself comfortable relying on your team, including property managers, vendors and of course, local Investment …
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I remember two years ago when I started to underwrite smaller deals, there was a rule that was tossed around on all the blogs and forums. It’s called the 1% Rule. What this means is that the monthly rental income should be equal to 1% of the total purchase price. For example, a property for …
When a bank lends you money on a deal, they want to be certain your property can support the annual mortgage payments. The metric they use for this is known as the Debt Service Coverage Ratio. In its simplicity, it wants to know that your NOI is sufficient to cover all of the mortgage payments …
When you get a loan from a bank or lender, they determine how much to lend and expect they’ll receive a certain amount of interest payments over the life of the loan. This is one way banks make money. However, if you decide you refinance or sell the asset too soon, they lose out on …
Back in December, I was touring a 48 unit apartment building near Detroit. This building had all the bells and whistles, including extra thick floors and special insulation between the tenants’ apartments to keep out noise between neighbors. While touring, I saw a dog grooming room, made specially for dog owners to come and bathe …
As previously discussed in an older blog post, cap rates are important when looking at any new deal. If you’ve been in the hunt for deals recently, you will notice that cap rates are extremely low right now. Everywhere. There is no other way to spin it. But Why? In this post, I will outline …
Any time you underwrite a multifamily deal, you want to receive the list of all the current tenants in the building, along with their lease terms. This document is known as the Rent Roll. The rent roll, as stated in the name, has the rents that each of the tenants pay, along with the lease …
When looking at a larger multifamily purchase, you will want two documents to help you come to an offer price: the Trailing 12 (T-12) and a rent roll (aka RR). In the article, I will do my best to break down how to look through the T-12, an intimidating document if you haven’t seen one …
As the great Benjamin Franklin said: “nothing is certain except death and taxes.” Let’s be honest, Taxes Suck. You work 40, maybe even 50 or 60 hours a week, earn your income, then Uncle Sam comes and takes a chunk of what YOU earned and takes it for the US Government. Imagine you pay for …
