BiggerPockets

This property consists of 12 units, 2/1, currently no vacancies.
The asking price is $569,000. The annual rent is $86,400, with listed potential rents at $90,000/yr. The units are 3 quads and deeded seperatly.

The property was recently renovated. The seller is a licensed real estate agent willing to accecpt the following financing: contract for deed, owner financing, private, may pay some of the closing cost, wrap around, conventional, and FHA.

I have some questions/comments:
1. Is there an advantage of contract for deed, owner financing, vs. wrap around?
2. I was reading some other post, and someone recommended asking for "Principal Only Mortgage", any thoughts on that?
3. Based on the info, is any more information needed to provide some feedback?
4. Where should I begin?
5. I need assistance with financing the potential portions not held by the owner. I will need a preapproval letter, for the showing appointment?

Any thoughts, comments, or questions; all are welcomed and appreciated. Thanks!
:D

I don't think doing a wrap around would be very wise. For starters, it triggers the DOS clause in the contract. Is the bank willing to overlook that? Secondly, you are making payments to the seller, who in turn makes them to the bank. If he defaults, you lose the property. I would first find out how much of the property is currently financed, if at all.

How much are you going to bring to the closing table? It seems like you are looking to finance whatever the seller can't finance. If that is the case how do you plan to pay for repairs or capital expenses? Also, the numbers you list are pretty much a best case scenario and WILL get worse.

As it stands, you need to assume 50% expenses for the property. That leaves you $3600 per month NOI. If you put zero down, you'd be underwater $983 ( 7% @ 30years) per month, so this doesn't look like the best deal using the figures you provided.

Ariane,

I suggest instead of thinking about how to structure a deal, check to see if the deal pencils first.

Annual Figures

Gross rents $86,400
NOI:........... $43,200 using 50% rule
Net............ $43,200
Profit/door ($14,400) ($1,200/month * 12 months)
Debt service $28,800

Max you could pay is $340k and still achieve your $100/door goal AND that's with very aggressive occupancy assumed (100%).

Thanks Cory for sparking such great feedback on my topic! I would agree that your #4 comment is key, and a constant for me, as well as everything else that you said.

Thank you to everyone else for your feedback as well. I am going to do more research, followup, and investigating and let you know how it goes.

Thanks Again!

I just went back and read over everyone's comments again, and you guys give it straight - keepin it real. I need that. Thanks again!!!!!!

I guess you learn something new everyday. I've never heard of that strategy but it's good to have it in the knowledge bank for future references.

Thanks Jon for the explanation.