Need advice for this 4-plex

Here are the numbers:

1972 built, in good shape with brick walls, might need minor repair on roof and gutter.
8000 sqft lot, 4400 sqft building
4 Units - all the same at 1100 sqft, 3 bedroom, 2 full baths. two ground and two up .
Washer and Dryer connections, Kitchen can setup breakfast, Living Room w/ fireplace /dining.

Ask $200,000 firm
Rent claimed to be $700 each and 100%. Checked nearby and found more likely in $600-650 range. So the total rant per month is $2,800 on paper, and $2,400 more likely for 12 month full rent.

Finance needs 25% down, 5.75% at 20 yr. Local tax ~2.5%. Insurance 1,500 total for all 4 units.

Please advice what to do.

Thanks a lot.

Yidai

WHY 25% down?? Is it owner financing?? Personally I do not feel this is a great deal. seems like alot of cash to outlay on a small deal but here is the breakdown of basics with your input.

Monthly Principal & Interests $1,010.77
Monthly Real Estate Taxes $416.67
Monthly Insurance $125.00
Total Monthly Payments $1,552.43

Now if your grossing $2500 a month there is good cashflow of $1000 a month but then you need to fgure in expenses of at least $500 a month which still leaves room. However your $50000 downpayment will not be recouped in this deal and with the markets it can slip away with equity fast. You can leverage $50K much better on other deals in many markets. Also you did not mention who is paying any utilities, lawn care, snow removal (if you have any), advertising, legal fees, etc.

Also how do you know property worth $200K??

Thanks a lot.

$200,000 is what he asked and told no nego. All fees except water and sewage paid by landlord, which is $300 to 500 per month for total 4 units a month depnds on season. It is a low income market/area, but not warzone as most renters are students and workers for a nearby shopping mall and a nearby millitary base.

25% down is what I learnt from the loan agent. I have a good crredit score of 800, but this is my 2nd rental house (the first one is a SFR, bot as primary home a few yrs ago, and kept for rental after I bot the current house).

The loan agent told me that investment 2nd home need 25% down, otherwise very high rate bababa…

I really appreciate if you can share with your experience how to reduce downpay. My first home also put 20% down at 5.25% 30 yr.

Best regards

Sorry a mistake. I mean the landlord paid water + lawn @300-500 per month and tenants pay all others.

Well as for the downpayment of 25% on investment homes, since 4plex is it a a residential buy and I would think you can swing it with 20% and with 800 FICO maybe even 10% but then you have PMI. I would post a question in the finance section about downpayments.

I no longer deal with bank financing so I can not say for sure, I am out of the loop with how mortgages working these days and there have been some changes for the better recently. I am still one of the lucky ones where I have very large credit lines to draw from so my money is always there.

Also when the seller is giving you a this is the price or walk deal, usually I walk unless it is a really a great price. It is a sign he is not desperate to sell so he can care less and chances are the price is to high.

Agree with everything yrush has said so far. Also, now that you throw in the fact that you’ve got an extra $300-500/month in utility expenses your profit margin in almost nothing. In my area, I won’t pay any more than $50,000/unit for a multifamily (unless its in some ridiculous high class area that had rents to support the price but that doesn’t sound like the case from what you’re describing). Why is the seller not willing to negotiate? the best deals come from desperate sellers, and obviously this guy ain’t one of em…
What condition is the building in? any deferred maintenance, or is this turn key? why don’t you try and find some private money or a HM lender that will do less DP? skip the bank! 25% down is ridiculous, especially with an 800 credit score! again, find some private money and refi out after a few months!

Thanks a lot.

I made an offer at $125,00 and see what will happen.

At $1250,000

The monthly pay on mortage will be $750 at 30 yrs, 7% rate, with 10% down ($125,000 down)
Tax still the same assuming 2008 tax, $4832, or about $400 a month
Insurance $1500 /yr, and $120/month
Landlord paid water and yard, $300-500/month
Total cost $1570-1770/month

Rent $2500/month

Cash flow ~$900-1100/month assuming no fixing.
If minutes $500/month fixing reserve, cash flow $400-600/month.

Return on investment ~50%

I think I might accept a max of $150,000 if the broker come back
then my return will be in the 30% range.

What do you think?

Thanks

unmotivated seller. Walk from the deal… Call him in 1 month if still on market and put in same offer for 125K