Making the first move

General Real Estate Investing
1

I am going to invest in my first rental property this week and wanted a little guidance. I think I can get the property at an acceptable price, but here are some extra questions.

  1. The property was foreclosed and has been vacant for about 1 1/2 years. How can I tell if it’s up to code? Do I call the city inspector before I put in a purchase agreement?
  2. After I purchase it, what needs to be done in order to get my first tenant in (all that is needed in two of the units is paint and carpet).
  3. Is starting off with a 3 unit too much for a beginner?
2

It is much smarter to start with single family houses. Is a 3 unit building too much? There’s one way to find out!

Good Luck,

Mike

3

Monnchew,

  1. For your first few properties you will want to hire an inspector. After the bid is signed you will hire the inspector to go through the place. In your contract you need to have it contingent on a final inspection. If it fails your inspection then the contract is void and you get your earnest money back.

  2. The best way to get a tenant in is to put an ad in the local paper. If you’re worried then put an add in 2-3 papers in the area and maybe one of two in surrounding areas. Just see what others are charging for simular properties in the paper. It’s really that simple.

  3. SFH are great, but to me there is nothing wrong with starting with a triplex. But if is only an acceptable price, then you need to walk away. Only super deals can be in your portfolio or you will have nothing but stress. The lack of cash flow will really tear at your gut. It really has to be great deals only!!!

4

Thanks Iron Range for the input and here is the deal:

3 Unit House (2 - 2 bedrooms & 1- 1 Bedroom)
SEV (state eualized value) is $57,200 (I think this equates to a retail of aprox $130,000; 57,200 x 2.2, is this correct?)
Their Asking price - $75,500
Repairs should be aprox. $10,000
Taxes are about $4,000 / yr.

I believe it should rent easily at $550 per 2 bedroom & $350 for the one bed. Total = $1,450

I have excellent credit and the repairs should be right on. The property was owned by a bank and were asking $150K a few months ago, but they want to drop it.

Does this look like a deal?

5

monnchew,

  1. Does your rent figures include utilities?
  2. Have you discussed with anyone what your interest rate will be on this place? How are you getting the $10,000 (loan, credit cards, money in bank, etc.)
  3. How much are you putting down. More down will mean a lower interest rate, so I just want to know what kind of interest rates we’re looking at on both the property and the repairs.

If the deal doesn’t include utilities then this place won’t make you rich, but isn’t too bad. If it includes the utilties then walk away, it won’t work.