Looking at a 4 Unit Multi-family Property asking price 90K. Question is if I ask for down payment and closing cost paid, do I still try to buy the house at 70% LTV or do I rise to 85 LTV % to cover the cost of no money down. Want to make offer that is reasonable to seller so that they will consider offer. I guess real question is when trying to get into deal with no money, do you give seller asking price and more. Little info each units could rents for $600 on HUD Heated unit(s): 4, Individual electric utilities, Individual gas meters, Individual heating system, taxes around 5000k. Deal is in up state N.Y. Have a two unit that already on HUD. Can only get finance at 90 LTV.
Just read a great post back in april on “Reasonable Cash flow”
propertymanager
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The Facts Matter!
Re: Reasonable Cash Flow?
« Reply #29 on: April 24, 2007, 07:04:11 AM »
phatman,
Actually, the maximum purchase price for a rental property (rule of thumb) would be gross rents divided by .02, then subtract repairs and improvements.
Again, as a rule of thumb, you can multiply the purchase price by .02 to determine the rents you will need to make a reasonable profit. Remember that rents are set by the market.
Mike
Is there a % of rent that can be use to Estimate repairs so that I can come up with a maximum purchase price, add in closing and down money.
This maybe a way to come up with a reasonable no money do offer.
Orlandoterry,
Operating rental properties is ALL ABOUT THE NUMBERS! Cash flow is King. If I understand you correctly these are the numbers on this potential deal:
Purchase price: $90,000
Gross Rents: $2,400 per month
If that is correct, then:
Operating expenses would be about $1,200 per month
NOI: $1,200 per month
Mortgage: (30 yr, $90,000, 8%) $660
Cash flow: $540 per month or $135 per unit per month
If there are no major repairs needed, I like this deal. Offering full price of $90,000 in exchange for 100% owner financing seems reasonable to me. You might even be able to offer $90,000 and get him to finance you for a lower interest rate (maybe 4% or 5%). I’m guessing that based on these numbers, you are buying this deal at well below market value. Most deals offered at retail will NOT cash flow like this. So, even though you’re getting 100% financing, your LTV should still be relatively low. Do you know what the market value is? Comps?
Good Luck,
Mike