4PLex Fully Rented
$230,000
$2,400 in monthly Rent rolls (actual)
$7,200 in Yearly Expenses (actual)
Good Deal or bad???
Any deferred maintenance on the property that you know of?
None that I can tell.
Havent had it Inspected yet.
Should I be questioning the Expenses???
2400 Rents
600 Expenses (25%)
Is this the norm? Or low? 25%?
Do a quick search for “The 50% rule”- should answer your question.
Yes I would question it. I find it hard to believe that this property is producing $7200 in yearly expenses.
If the seller is listing property taxes, insurance, utilities, etc as expenses, then $600/mo for expenses isn’t that outlandish. This rent amount is WAY too low for that asking price. With gross rent being 1.04% of the purchase price, you’re asking for trouble.
After further review yes $600 a month covers all your listed expenses.
But the 1% rule I thought was good. if Atleast >1%? I know not a steal by any means not >3% asking but if I stay @ 1% I could still be introuble???
Read this and you will understand real estate valuation. Ask questions pertaining to it if something is not clear to you.
No mortgage? paying cash? If there is a mortgage with say 20% down payments still have to be close to 2k a month plus taxes, Ins, Water gargabe bills. Need higher rents.
Let’s make this really easy. We won’t even talk 50% rule this time.
Your monthly rent roll is $2400.
Claimed expenses per month are $600/mo.
Payments on 230K at 7% are:
$2067.31 for 15 yrs
$1783.19 for 20 yrs
$1530.20 for 30 yrs
I haven’t heard of anyone wanting to go out to 30 yrs for a property like this. More like 15 yr amort. Even at full occupancy all the time, you would be negative each month for a 15 yr amort. with the claimed expenses.
There’s no way I’d touch this with the numbers you listed. If you have a prolonged vacancy, fair amount of damage at any time, big system replacement (roof, HVAC, elect upgrade, etc), you’re REALLY going to be hurting. Rents being 1% of purchase price is not good at all. Remember, just because you’re buying a property doesn’t make it a good investment. There are tons of people doing things wrong in REI and losing their tails.
I have learned that even with all the quick numbers and rules… there is nothing like putting it all down on paper for the first 12 months projections to see where your numbers really put you at the end of year 1.
230k 5.5% 30 yr $1,299. VA prequalified loan.
With this mortgage and the ability to put 10%-20% down (if needed) payments change the deal in your mind??? I would prefer to not put any down-the blessing of VA loans…
For the VA loan, you’ll have to sign an affadavit stating you will be occupying the property. You can’t use that loan if you’re just going to buy a fully occupied building and live somewhere else. And no, stretching out the term or putting more money down doesn’t change the mechanics of whether it’s a good deal or not. You do have a good rate there, but I would either have to have much higher rent or a significantly lower price to even consider this property. I agree VA loans are great (we used one on our personal residence), but any tool has to be used properly to produce a good outcome.
Just for clarification… Here I was speaking about commercial loans for this property.