I’m considering a 3 unit multi-family property.
What is desired below market value percentage that most investors seek?
Howdy Cali:
The answer depends on your plans for the property. A lot of investors pay retail and just buy a rental property for tax savings and appreciation and retirement. Had I done just that in Bellaire in the mid 70’s I would not be working so hard now. Just 5 or 6 rental properties then would have appreciated from $50,000 each to $250,000 and they would now be paid off.
Some investors want 10 to 20 % below retail making their money going in so to speak in case the market shifts against them they can still sell and break even with commissions and closing costs considered. Cash flow will be better also at a lowed costs going in.
Rehab investors using hard money have to look for the deepest discounts because of the fees involved and the carrying costs and fix up. Also most HML’s will usually only loan 65 to 70% of the after repaired value. I try to let this number be my total costs in the property except the sales commission and other closing costs on the flip side.
Hope this gives you some insight.
Thanks for the advice Ted. Makes a lot of sense to me!
Do you recommend buying rentals in the Orlando, FL area?
Cali-You aren’t the Cali I know from T-town by chance are you?
Florida is a growing market, I did a loan for a resident of Jacksonville today. I have been told by a few clients in FL that many of the properties are appreciating 20% annually, and I’ve been talking to a potential buyer in Key West where properties are rising an outragous 40% annually due to the great location and limited space, however, the property asking prices are through the roof (customer I’m working with is looking at 1100 sq ft house that apprasies for 550k! Most lenders want 10% down on investment properties, however, there are a few that will go 5% down & others that will do the loan without any money down (if seller pays closing costs) if your credit/income is solid.
Best of luck,
Chris