I have found a realtor owned home that was on the market a year ago at 180K . Now the realtor owns it and has done some repairt and rennovatons … Siding, Windows in 2/3rds of the house.
New carpet , cabinets, showers paint in 2/3rds of the home. It is a 3 family home 4br, 4br, & 3br 1 ba each. Now the its been repaired he is asking 267,500. there is a sign out front 100% fiancing for investors or owner occupied. I feel the price is a lil steep but a nice multifamily unit in a decent area walking distance from dwntwn. I could need some more repairs to compeltely renovate. Going rents are approximately 700-900 for 4 br units and 3br run 600-700. How do i approach the realtor with the right price and creative financing techniques? What other questions might i need to have answered? Lead paint? asbestos? the house was built in 1900’s Any input is greatly appreciated… Wrap@mortgage? Lease opt? hmmm what else…
Yes, I think lease optioning it would be a great idea. But personally I dont really know much about investing in multihouse divisions. If you want to buy it though, it never hurts to put in a really lowball offer, after all, Donald Trump bought Mar-A-Lago for 3000000 dollars, and by now its probably worth in the hundred thousands. But with a low offer, you can alway work up.
Beaver124
Mohegan,
Median priced SFR properties typically average rent for 1% per month of their value. (Rents will vary depending on other factors). Usually multi family units will produce more total rents than SFRs. If you used the maximum rents that you said are available in the area, then the maximum that the property should be worth is $250K and it should be more like $200K unless you happen to be in a hot market like California or Florida where everything is over priced.
Just my .02
Wilson
Thanks… Im not sure what Median priced SFR properties are but i think i get your drift. Elaborate on your one percent findings and formula for me… Thanks for your input
By the way, when i sayed hundred thousands about maralago, i made a mistake, i meant hundred millions.
Beaver124
SFR= Single Family Residential
Median Priced = in the middle of the range (50 percent higher, 50 percent lower)
Median priced is not average price. If you have a larger amount of homes on one end of the spectrum, it will change the average from the median but for the most part median can usually be taken as average.
Wilson
Mohegan,
The 1% is a general rule of thumb that basically says that an incoming rent of 1% of the purchase price per month (e.g., $1,000 per month for a $100,000 house) will cover the mortgage, taxes, insurance, minimal maintenance, and a reasonable vacancy rate…
For instance, I just bought a small 3/1 here for $57K. The PITI would be about $447 per month (100% mortgage at 7% for 30 years). A 5% vacancy rate is $22 a month, mininal maintenance is about $25 a month ($300 per year). Total is $494.
A 1% on this property is $570 so you would still be positive by about $75 a month…we get pretty good rents here in this area, so I get more than that for rent and it is still below market (I got the renters with the property and haven’t raised the rent – yet).
Hope this explains the “one percent findings” you asked about…
Keith
yes thank you for the insight… i see great explaination. How much or should i say what is the minimum positive cash flow i should consider or shoot for to make it worth my while
I typically figure at least 1/3 of mortgage payment (P&I) to be required for insurance, taxes, repairs and vacancies. If you are not at least making that much, you are in the hole.
Wilson
My personal goal, after all of everything is paid (including reserves for maintenance and vacancy), is a MINIMUM of $150 a month free and clear…that is $1800 a year not including the tax advantages, principal reduction, and actual appreciation…
Keith