Hi all, I’m trying to get started in landlording and am looking at a property in the next couple of days and would really appreciate some advice.
The property is listed as being on a “short sale”. I’m not certain what that means and if it’s good, bad or indifferent?
The property is a duplex listed for $90k. The owner is responsible for water (is it possible to separately meter that? and, if so, is it expensive?). It appears that one side is rented for $500/month and the other side vacant.
I’m hoping that some of the folks with experience can give me an understanding of what to look for in this deal.
Thanks in advance!
Welcome to the board! A short sale simply means whoever owns that property owes more on it than it’s worth and the bank is allowing it to be sold for less than what is owed on the property. If it goes into foreclosure, the bank will likely lose more money so they’re basically trying to cut their losses now and get what they can out of it. Being a short sale doesn’t mean this property is better or worse than anything else. The owner for whatever reason (maybe borrowing against it or falling property values - or both) just owes so much there’s no way they could sell it for what they owe on it.
It is possible to separately meter the water. I’m not sure of the cost. We have a 6 unit building w/ one meter. Our water bill for that ranges from $100-140/mo. Some people wouldn’t want a building where you as the owner have to provide any utilities at all. In my opinion, paying water is far less harmless than paying electric or gas. If you have to provide the utilities for heating or A/C, your bills will be expensive and could vary wildly from month to month.
Check the property tax amount and get some insurance quotes. Can you fairly accurately estimate any repairs to the property? You’ll want to find out if the current owner holds any security deposit on that tenant. If so, that should be transferred to you at closing. Also review the lease. If the tenant is on a lease with a term (rather than a month to month lease), you will be bound by the terms of that lease until it expires.
If you’re just starting out and don’t have any of your own paperwork yet, you need to at least get a good lease drawn up to have the tenant sign (if they’re not on a lease w/ a term). Then I would also get a rental application and a move in/out inspection checklist ready for when you rent the other side.
Since this is a duplex, find out if the tenant mows his half of the yard and the owner is doing the other side or if the owner provides lawn care for the whole place.
You can use the search function at the top of the page to search for the “50% rule.” You’ll find tons of posts on it. That will help you determine a good value for the property.
Thanks for the info justin! I’ll be certain to check on the items that you mentioned