Hi everyone, tomorrow will be My 1st time going to see a Mutli-Family home that I’m intertest in as an investment. It a 3 family, listed at 239,000. The rental income is $2125 mo. I can get 100% financing at 7% blended.
I would like to hear what everyone things and any advice you have to offer. I will be looking at 4 more this week.
I was adviced by the mortgage man, that if possible before I go into a deal to get myself a lease from the tentants that are already in place. Anyone experienced in that. Is there any violations in doing so?
You may have misunderstood your mortgage man. You want to look over a copy of the lease that is existing. You can not sign a lease on a property that you do not own. You may want to sign new leases with the existing tenants after you buy it or you may not want to renew the lease if they are filthy or deadbeats. If they are good you will want to keep them and sign a new lease when theirs expires. On the sale of rental property the leases transfer with the property unless there is fraud involved. if it is a foreclosure then all leases are subject to termination by the lender and most lenders do in fact vacate the property after they acquire them.
Ted, I’m guessing he heard the mortgage guy correctly. I was told the same darn thing. They sometimes do that when a buyer doesn’t have the resources to carry the expenses for a few months without rents.
It is ridiculous to request it.
Auggie, It should not be a big concern unless it becomes a condition to close the loan. You will be notified of any conditions to close in writing. At that point you request the seller to help you get the necessary documentation.
When your agent fills out the purchase agreement you can add a condition for seller to furnish copies of existing leases at the time the purchase contract is executed. (signed by the buyer) That may help.
Actually, Ted is correct here. A potential buyer cannot have tenants (already under contract) sign a lease for a future arrangement. First of all it is more complicated than that: the issue of what if the buyer does not actually purchase the property but then you have a committed signed lease agreement arises. Secondly, signing a future lease agreement would mean involving the current landlord who may or may not be willing to get involved at this point. Are youplanning on living in this multi-family? I know you mentioned it as an “investment property” but will one of the units be for you? If all units are going to be rented and it is a true invesment property I can tell you this from my perspective of being in the mortgage industry: the majority of banks require a min. of 10% of any inv. property deal, regardless of how the deal is structured. There is too much risk to lend 100% on a NOO unit. Perhaps your broker did find a bank that will lend to that type of situation, and if so that’s great. I have 1 bank that will do that, but it’s EXTREMELY uncommon. At the very least, definitely take a look at the lease agreements and best of luck!
You can’t? When I was a kid I played doctor and police man I wrote people prescriptions and tickets. If I wanted to play landlord I couldn’t sign a lease? Man that took all the fun out of it!
Without knowing the specifics of the ideal t is difficult to give much advice. But here are a few things to consider: without knowing what the rate is for the 2nd loan it’s hard to determine what your total monthly P & I is. But, keep in mind that you will need to factor in real estate taxes, and home owner’s insurance (which will be more expensive than primary residence hoi as this is an inv. property), in addition to maintenance costs. You should take a look at the fair market rent values of the area to compare the current rents of the property to the local standard. And make sure you are well versed in tenant and landlord rights!!! Hope this helps…
Also don’t forget electric if owner pays for house lights, water and trash. Also on a couple of my apartments we have a large license and inspection fee yearly. It amounts to over $850 on each building! All these things add up and lower you cash flow.