Hi,
I am a professional investor therefore I buy real estate like professional investors. If I am seeking a rental (Portfolio) property to rent / lease I am still looking to try to buy it at as close to a 30% discount as possible, now because I am going to own it long term I don't have to acquire it at 30% or more in discount, but the numbers have to work and I have to feel the price is appropriate for market and that I will be making a profit!
Let’s go backwards, unless you have all cash and you can finance your end buyer as an exit strategy on a condo, don’t buy it! Condo’s are very hard to get financing on as lenders won’t make loans on units in complexes where there is more than xx% rented within the property. Even though ratio’s may be great today does not mean in 7 to 10 years 40% of all unit’s are rented and no lender will make mortgage loans on those unit’s!
The only time I ever have advocated buying condo’s as an investor is when you can buy a unit cheap for $10k to $15k and recover your whole cash purchase price in less than 3 years where owning it has little of your cash tied up and you are making a great return reguardless of whether you can sell it in 7 to 10 years to get out of it. You may only be able to re-sell it with owner financing depending on availability of mortgage financing.
Four plex at $235k, well even though this property is classified as resdidential property (1-4 Units) it is assessed on basically the same basis as multi unit commercial property (5-5000 units) and the 50 / 50 rule basically applies! You don’t say whether your income statement of $2200 has been adjusted for a vacancy factor or not but let’s for conversation say that $2200 is net. So half of $2200 is $1100 dollars for expenses and $1100 for debt service.
$13,200 - Expenses
$ 1,320 - Management
$ 800 - Property Insurance
$ 1,000 - Property Taxes
$ 2,400 - Water and Sewer
$ 720 - Trash
$ 380 - Lawn Care
$ 300 - Winter Sidewalk Shoveling
$ 1,000 - Maintence
$ 1,400 - Appliance Reserve
$ 3,200 - Long Term Replacement Reserve
$ 400 - Legal
$ 200 - Advertising
$ 120 - Office Supplies
$13,240 - Total Expenses
$13,200 - Debt Service
$11,928 - Principle and Interest @ 5.25% Non Owner Occupied for $180k 1st Trust Deed
$ 1,272 - Positive income
$< 40> - Expense over budget
$1,232 - Net Positive Cash Flow
Now this 4 plex is not bad however it should be purchased cheaper! You would be putting up $45,000 with $1,232 return for your cash on cash and no positive cash flow. This is only a 2.75% cash on cash return - not much better than a bank!
Now the fire damaged and rebuilt home is probable best as it only takes $25k to buy, and it looks like it would positive cash flow roughly $50 to $75 per month after expenses and debt service. The somewhat down side to fire damage is you will need to disclose it when you sell it.
I would start at $95k as an offer on this property and try to get it closer to $100k or between this and your number of $110k!
Good Luck,
GR