I keep feeling as if there are good buys I am missing out on because I am currently working on a project for my j.o.b, finishing grad school, and improving my credit.
I found a property which is listed with a realtor at 93k. It is 2100 sq ft. two units: 3/1, 2/1. $1500 a month total rents. The listing indicates expenses at $2500 annually.
I’m considering taking a HML for the 1st, and asking for seller financing for the 2nd. I see itemization as follows with positive cash flow:
1st mtg – $650
2nd mtg – $250 /mo for 5 years (interest only? )
total mortage $900
taxes (I’m assuming this is the $2500 from the listing. ) $200 /mo
**expenses (in the even I’m wrong about the taxes) $200/mo
vacancy 1500 * .07 = $105
management 1500 * .07 = $105
1500-1350 = $150 cash flow.
I don’t know what to do to quell the feeling that I’m missing good opporunities now. I think next spring is going to be a time of real estate feasting as the buyer’s market heats up. UGH
Here is some advice I can offer, more offers will come in the future if you have to let this one pass. I will admit I am still a newbie myself and I have had to let a few deals pass because the numbers did not work out. So take your time and do what is best for yourself.
$2500/year for expenses could mean just about anything, but I’m guessing it doesn’t mean maintenance. I would definately call the listing agent and ask them what the “$2500/year expenses” entails exactly, and how they arrived at that figure. It could be taxes, insurance, etc., all together (doubtful, tho). You can also do your own numbers (all figures per month):
Gross Potential Rent: $ 1,500
Vacancy Factor: $105 (7%)
Gross Operating Income: $1,395
Management Fee: $120 (8%)
Maintenance Fee: $45 (3%)
Property Taxes: $??? (find out - i’ll guess $150)
Insurance: $?? (find out - i’ll guess $40)
Other: $15 (1%)
Gross Operating Expenses: $370
Net Operating Income: $1,025
So, you have $1,025/mo for debt service. Based on your figures of $900 for both loans, that’d leave you with $100/mo positive cashflow.
If I were in your shoes I would at least bird dog these deals until your done with everything else in your life that you need to get done! You could make a little instead of nothing… Network and find other investors!
Just wondering, what are you studing in grad school?
in my experience, the listing agents or sellers idea of expenses
is a gross understatement of actual expenses. be sure you know
how to calculate and what to consider.
make sure you read
“what every investor needs to know about cashflow”
before you buy investment property. see http://topbooklists.blogspot.com for a link to amazon for this book.
I’m doing a master’s in distance learning. I develop courses for delivery via the web/computer/and virtual classroom.
I was wondering if you can free up some of your time by doing your real estate as part of your masters work. When I got my MBA, I did my thesis on the project I was working on at work. Today, I would do it on building a real estate business. That way the more I work on the real estate, the higher grade I would get and also kill two birds with one stone. With distance learning, you may want to try to use the process of learning how and where to invest in real estate into your project somehow. You have to demonstrate learning something…it may as well make you rich while you demostrate it.
thanks, an interesting proposal. Perhaps I could use this approach in the research class.