Hey guys and girls; I’m ready to take the plunge! I found a 2 unit and a single unit in New York that look quite promising.
They are fully tenanted, the thing that kind of sticks out to me is the expenses are somewhat low…23.45% is what I come up with.
Here are the numbers: (all number combined for a total of 3 units income and expenses)
Asking price (for the 2 buildings) is $69,000.
Gross Income: $17340
Expenses: $4066.00
Net Income: $13274.00
With a 30 Year fixed at 6.75% and a 10% down I have the mortgage coming to $402.78 The expenses monthly would be $483.33 including 10% prop management meaning a combined $558.89.
If it grosses $1445.00 minus the expenses of $886.11 it would be cashflowing at $558.89
I would be asking the seller to pay all closing costs.
With the seller paying all closing costs the Internal Rate Of Return is 97.20%. I was thinking that was pretty good.
Is there something I’m missing?
Is there something different you guys would be doing or asking?
Would you structure the deal differently?
I’m offering asking price; would you immediately go lower and how low?
IS there any contingencies you guys just don’t offer on property without? This will be my first investment offering.
I have read everything i can get my hands on real estate related and feel I know a bit; I learned even more from this site and I just want reassurance I’m not missing anything.
The 45-50% “rule” would have expenses at about $8-9k, which is about double what you posted. Even so, I think that figure is awfully low. I know in Texas, $4k would be lucky to cover property and insurance, let alone PM, repairs, any utilities, etc. Ask the person for a breakdown in expenses., or even an actual P&L statement for 2006.
Wow, You change the expenses to 9k a year and things sure change! LOL.
I am going to ask the agent for the expense break down; I already had to get those figures and it was a word sheet and a MLS listing so that didn’t help.
Thank you again. I really appreciate your help!
I notice your name of no money down, do you do loans by chance? I had a few questions for a lender about my financing options… I have a strong credit score (over 720) and looking at property’s with DSCR’s of over 1.8’s. Should I be concerned with finding funding as I am a Realtor and my income was at a loss last year being my first year and also doing investments…? I have quite a bit in the bank but I want to keep it there if all possible.
NoMoneyDown is absolutely right. Your expense numbers are bogus. I never believe the seller’s numbers (or the realtor’s numbers). What do they know about rentals?
Here is a better estimation of the situation.
Gross rents: $1,445
Operating Expenses: $720
NOI: $725
Mortgage: $403
Positive Cash Flow: $322 (or about $107 per month per unit)
i am sorry to interrupt, but NoMoneyDown mentioned the 45-50% “rule”, its very interesting. what is that? can someone explain it a little? or refer a link so i can read about it?
I don’t see taxes and insurance included. Not sure what the expenses covere. Do that include utilities like water that many time landlords pay? Lawn/yard care? snow removal?
Looks like a very nice deal.
Write in the contract that the seller will provide copies of leases within 3 days of acceptance for your review.
Your mortgage number is a tad low as you’ll probably only be about to 80% at 6.75% and then have a 9% 2nd. There are some 90% LTV loans but I would image the rate will be in the 7.xx%
I was just going to ask this. I just got an investment loan. 100% financing for 9.3%. If I had put $$ down it would have been a bit lower, but not that much.
Thank you - Again; I have no experience yet. This is the kind of stuff that really helps me a great deal. Thanks for sharing you particular experience.
I dont know if I’d even qualify for 100 percent
plus - you’re asking about a 30 year fixed…your comm loans go 20…maybe 25 if you’re lucky.
private lending can be a bit more creative…alot more creative acutally and any kind of owner financing is the best…deferred interest and other things can really make a big difference…maybe not so much with a rental, but even then - 5 years of a portion of deferred interest can make a big difference if you’re holding it…then selling it down the road.
but take into account the speculative nature of this type of investing.
