Not a bad 1st deal?

General Real Estate Investing
1

I previously posted a deal that I was considering, it was a triplex for 360,000, rents were generating about 1800. Everybody said that was a bad deal. I 100% agree. I did alot a research and found that the rents were very under rented. the property is in reno nv, and you cant find a triplex for under 300,000.

The triplex is actually a SFH with a dueplex behind it. So I went to the city plan department and discoverd that the lot could be split into 2 lots, a duplex and a SFH. The cost would be 2140$-6140$ seperation fee and about 2000$-7000$ to split water wich I can do my self if I deside to. The SFH could potentially sell for 250,000-300,000 and you cant find a duplex in reno for under 180,000. I talked the seller down to 310,000 less 20,000 for repairs so actually 290,000 from his 370,000 as is asking price. He is also financing 30% low intrest only for 7 years and he will allow us to move the note to a difrent property when we sell next year. So we could potientially have alot of money to work with next year for futer investments.

I’m not scared of hard work nor am I scared of risk. So as you can tell I decided to buy the property. what do you fellow investers think of this one?

2

Well, if your numbers work out it sounds like a great deal. Of course, there is the IF.

You see the good, so I’ll point out some possible bad.

First, you say that the rents are VERY undermarket. That’s good on one hand, but if you buy and jump in and try to raise them to market, you might lose all three tenants. If that happens, can you pay the bills until it’s re-rented? How long, on average, does it take to find a renter in your market? Also, are these tenants month-to-month renters or are they on a lease agreement? In others words, can you even try to raise the rents at this time?

Second, I’d try to peg down those separation fees and the cost to split the water to a narrower figure. Also, if it’s work that has to have permits, I recommend NEVER doing it yourself, unless you happen to be licensed in that particular profession. There is simply too much legal risk to make it worth the money saved, in my opinion.

Third, as I said, if your numbers work, you’re golden. However, from your comments, it doesn’t sound like you know for sure what the numbers really are. The SFH could potentially sell for 250,000-300,000 That’s a wide margin for an appraisal, and “potentially” doesn’t sound very reassuring to me. You also have to take into consideration that by splitting the lots, you are trying to sell a SFH with a duplex on it’s backdoor (or side, etc). Many potential buyers will see that as a negative. If the neighborhood is mainly rentals/duplexes, then selling a SFH may be very difficult.
you cant find a duplex in reno for under 180,000 That a wishful thinking statement. What it means to me is that you really have no idea what the duplex is really worth. Before pursuing, I’d find out exactly what THIS duplex could sell for in this market.

Just my thoughts.

Raj

3

Hi roger, thanks the comments

I wont raise rent untill the lease expires, I will raise rents very gradual untill I meet the market rate. Or I will set the rent to market rate when or if I have new tennants. I have plenty of money to take care of the morgage if I have to find new tennants.

About splitting the water, I am a Licenced union plumber and getting permets and doing the work or anything else for that matter is going to be very easy and cost efficiant for me, The only thing about this is lack of time.

As for the numbers, your right I am very unsure about exact numbers on that note I am 100% sure that I will not get less than 150,000 for the duplex and 240,000 for the SFH, Its getten to be that you cant find a SFH 3bed 1 bath with a basement as big as the upstaires around here for under 280,000 and thats fair condition. and all fails I will keep it and eventually the place will be a very good cash flow for me.

And your also right, there is alway the IFs. But I think some people could not have been succesful without risks and IFs.

Thank you Roger J