Real Estate Agent · Circleville, OH · Member since 2008 · 633 posts · 488 votes
I don't post here VERY often but I thought that I would post some information on my brother's first deal (I manage the account).
Anyways, many people here have said in the past that it's impossible or very hard to find good deals on the market that are listed by real estate companies/Realtors.
Anyways, we purchased a little SFD property for $46k (w/ $1700 BCC). Total repairs to date have been around $3,000. Went into it with $3,000 down , so a total of $6,000.
$675 per month in rent currently with pretty good renters. Appraisal came back today at $70k so now we can cash out some equity.
Not too bad for a listed property i couldn't sell to a anyone but my brother (For some reason, no one around here wants rentals).
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
19y
So, $675/month rent less 50% for operating expenses gives you $338/month NOI. Payment on $43,000 (7%, 30 year) is $286. Monthly profit about $50. If your brother is managing it himself, he's putting the management fee in his pocket, too. So, not too bad of a deal. Certainly a LOT better than many deals I've seen around here where you would pay up towards $200K for a place that rents for under $1000.
But, I don't how it stays a good deal if you refi. If you go to 80% of the $70K appraisal, your payment (P&I) goes to $372. You get $13K in your pocket, but now you're losing money each month.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
19y
Hmmm. I calculate your first payment at $267. Assuming you take out 13K at 9%, that's another $100. You say you're making $175/mo. So, that leaves $125 a month for expenses. So, I'm sure that does cover taxes and insurance. But sure doesn't leave much for property management, maintenance, vacancies, advertising, make ready after a vacancy, legal fees, utilities you pay, or anything else. I'd sure be socking that $175 in the bank to cover the expenses you are going to have at some point.
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
19y
Originally posted by "schockergd":
Most likely, we expect that, the refinance is going to pay 5% on a 4plex that can be converted to a 5plex for about $100 (What a great deal).
Did anyone check into financing and the impact of converting the property from residenial to commercial? I am assuming that the local zoning if fine with the density.
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
19y
Originally posted by "schockergd":
Zoning is ok with it being a 5plex, it has been a commercial property in the past (Small town, no formal zoning).
Great.
Did the buyer look at the commercial loan terms in case they later want to finance the place after it is converted? Shorter term, higher rate, lower LTV is the norm.
Real Estate Agent · Circleville, OH · Member since 2008 · 633 posts · 488 votes
19y
Yes, there's a local bank we deal with for commercial stuff, they're always pretty great about commercial. 7.5% fixed for 5 years, baloon at 10 years, amoritized for 30 years. 75% LTV....They get "Creative" if they have to.
Real Estate Agent · Circleville, OH · Member since 2008 · 633 posts · 488 votes
19y
The current owner lives in a 4br 2.5ba section of the home, at one time it was a 5plex , but they converted it to a 4plex for financing reasons. To do that, they had to put a door that allowed access to both sides...Door has to be blocked to make it a 5plex.
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
19y
Originally posted by "schockergd":
The current owner lives in a 4br 2.5ba section of the home, at one time it was a 5plex , but they converted it to a 4plex for financing reasons. To do that, they had to put a door that allowed access to both sides...Door has to be blocked to make it a 5plex.
Great find. I bet your brother will be thanking his Realtor.
Too bad most Realtors like working for 3% of less when the real money is being a principal. Then again I like not competing with the Realtors.