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Old July 17th, 2012, 07:40 AM   #75
Nuggets
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Join Date: 09-15-06
Location: Bay City, MI
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Quote:
Originally Posted by RyeBread View Post
40k annually is not that much on a 62 unit apartment.

It's a lot to me. Also, he owns multiple properties, the largest being a 10 unit.


More than likely he doesn't actually own a couple million in assets free and clear - in fact most commercial property is not owned free and clear, rather they are on a cycle of nearly endless 5 year balloon, 20-30 year amortized loans leveraged at 80/20 (or worse) - after taking into account depreciation, financing charges and other tax shelters it's likely that he shows a paper loss year after year, and his true internal rate of return can't really be calculated until the reversion/sale when he's ready to cash out of that investment.

He has been paying on/aquiring these properties for 30 years. He says he will have them paid of in about 5 years. He also says he needs to take in $30k each month just to break even and that doesn't include maintanence.

My friend is getting hit from all angles. There is a serious glut in housing in and around the Bay City area, he's lost a shit ton of equity due to the housing market falling on it's face, He's had to lower his rent to put bodies in the buildings, and his tenents routinely destroy their living quarters because they are being evicted or are just all around douchbags.

I truely feel sorry for him. He would like to sell everything and get out of the business but he's trapped because nothing is selling right now.
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