2 Family Deal in Buffalo - 2005

Hi Everyone, In January of 2005 my wife Veronica and I flew up to Buffalo (it's freezing, let me tell ya!!) and met with Dave Smith from DASA Properties to look at some Real Estate.

We looked at approx. 8-9 houses, mostly single family of varying degrees of quality and shape/size and one 2 Family property with a detached 2 car garage.

After a day of driving around and crunching numbers my wife and I decided to put a bid on one single family house (for I believe $14,500) we liked and the 2 Family house ($29,900). Unfortunately we were outbid for the single family house - I heard the bidder dropped the inspection period completely (I had cut mine down to 3 day inspection and raised my price a little) and offered more. According to my calculations the deal wouldn't have made sense for me anymore. The first bid on the multi-family was ignored by the bank (I offered $24,000). My second bid of $28,000 (final) and 3 day inspection period was accepted. I was told the bank (VA) had a new rep that deals with these foreclosures and is eager and hard-headed when it comes to negotiating prices.

We closed on the property mid to late February. VA had me pay the closing costs of approx. $660, the lawyer (Mikienis & Mikienis - I worked with a lady named Penny that was real nice and thorough) was approx $1000 and the Erie County clerk bill was approx. $380. Since this property is on the border of Buffalo in Cheektowaga my insurance is less than in Buffalo. I am paying approx $500/ yr. for this multi-family unit (I am with AllState and worked with a guy named Greg Horwitz). Taxes etc. were approx. another $1000. I have since received some gas, electric and water bills which in total come out to about $300. Some of those bills were estimated though and I will receive some money back once the tenant is in.

Dave had quoted me rehab costs of approx.$9-12,000. I anticipate my total rehab costs to be approx. $10,000 (I needed to reseal the basement, put in a second hot water tank for the upstairs unit and do cosmetic work). Unfortunately I was just informed that the furnace needs to be replaced which will be another approx. $1100-1200 dollars. I also just got my appraisal back which came in at $66,000. The appraisal was another $450.

So my total capital outlay of approx. $43,500 is about below 66% LTV when I refinance. I might pull out 70 LTV and get some cash out as well (to cover the closing costs). I anticipate getting between $575-625 for the downstairs 3 bedroom unit and between $475-525 for the upstairs 2 bedroom unit. So the rent roll is between $1050-1150/ month. I am not 100% sure about all my monthly expenses but I believe my cashflow will be between $270-370/ month.

Overall I am very happy with this deal. It came together quickly and with little problems and surprises (except for the furnace and the closing costs) and I will be able to get all my capital outlay back! I am excited and ready to do it again! Dave and Lisa have been great and very helpful along the process. If you can I recommend buying cash rather than getting a loan since you can save yourself a few thousand dollars in closing costs before refinancing.