[b]Current stats:
16 units - 11 rented - $4615 a month
5 vacant - 4 unrentable as is and in need of rehab.
Ok thanks. Repairs are $30k, and the units are at $419 a month C class. After repairs and new ownership, C+ class at $495 a month.[/b]
Class C so you’ve got blue collar low income and not many Section 8 if any. From what you have explained I feel it is in an area where the 2% rule should be applied.
So, 11 rented with 1 that you can rent right away. 12 units at $419/mo = $5,028 X 50 = $251,400
Repairs 30K per unit or 30K total. I am basing this on 30K total.
4 units at $419/mo = $1,676 X 50 = $83,800 minus 30K repairs = $53,800
So the 12 units for $251,400 + the 4 units for $53,800 = $305,200 Maximum Allowable Offer.
DO NOT go over $305,200. I would run the exact same numbers based on rent X 30 and give that offer first. Then let them work you UP from there not to exceed 305K.
You will also have to be fully committed to getting those 4 units up to speed right away or they will suck you down with them.
Thank you very much. I dont think she will go that low, but when the bank gets invloved it may not be up to her so I may get lucky.
Thanks again.
Just remember Brian, if you’re not getting shot down left and right you aren’t finding deals. It takes many offers until you get a winner. I’ll give 50-100 offers until I get one. I would NEVER consider going OVER the 2% rule. This is the maximum where you will need to be for the property to cash flow in an acceptable manor.
I read this whole thread last night, I’m not sure if this was mentioned already:
If Brian were to assume her mortgage, does the bank qualify him or does he have to meet any requirements?
It depends. If he said he wants to buy the property from her and wants that bank to finance it for him they will do the exact same check on his credit, etc as they would do for any new loan.
If he bought it Subject To the bank is out of the deal because you buy it, put it in a trust, and the trust gets assigned to you. The bank does not know it was “sold”. You keep making payments through the trust.
BUT that deal Brian came across was NOT a deal. He’ll need to look for a better one. You don’t ever want to take ownership of a piss poor investment just to have it.
Yeah I passed on that one. And the mortgage was not assumable. In a couple months if the price is better, maybe I will take another look at it.
Brian,
I told you what to buy it for. Give her that offer. She will refuse. Then give it again to her with NO increase next month. And do that a few times. People will frequently realize that their property is not worth what they said it was and will come down on the price. If she can’t come down due to her loan being too high the only option is a short sale and she will need to be 90 days late on her payments for them to let her out of it and take a deal from someone. AND only 1 out of 10 short sales actually go through IF you know what you are doing. Realtors have ONLY a 15% success ratio because they, for the most part, have NO CLUE how to properly do a short sale.
I agree with Hooch, the numbers tell it all. If it does not make sense on paper it never will in the real world. No amount of money can correct a bad buying decision…