BiggerPockets

Hello and thanks for your help

i am looking at 2 due plex in Georgia they are selling for 59K for both not each 59K total i am going to put down 8K owner if holding the loan at 8.5% for 8 years i have called a property management and they say i should be able to rent the 2 bd 1 bth for 400 a month(they are all 2bd 1 bath total of 4) that would be 1600 a month 2 are already rented at 400 and 300 this one seller is going to move up at end of lease i am thinking these are the numbers
rent 1600 minus
160 management minus
68 ins minud
700 mortgage payment minus
71 second loan on the home minus
100 taxes minus
100 maintinance and repairs
that should leave 401 for me is this a deal what else should i do before moving forward i am in California

Sorry, payment is only around $400 per month, not $450, since you are putting $8,000. The deal looks good IF the assumptions are correct.

Rob, the numbers might then look different. The seller who wants the $59,900 paid off in 8 years at 8.5%, is he expecting you to make equal monthly payments like a morgage or is he expecting you to just pay interest and then pay the principal back in 8 years? Is there a prepayment penalty if you pay it off earlier?

I did not know there was a wholesaler in addition to the seller. Does this guy simply want $5,000 split into 60 payments or does he also want to get that 8.5% interest?

it is 51900 loan with payments of 700 a month for 8 years the whole seller i am paying 71 a month for 60 months this is 5000 even no interest there is no prepayment

What about checking the title Appraisals and home inspections do i just call off the online phone book what else should i do to make sure years down the road when or if i go to sell it with conventional financing i don't run into problems

Originally posted by Rob Smith

What about checking the title Appraisals and home inspections do i just call off the online phone book what else should i do to make sure years down the road when or if i go to sell it with conventional financing i don't run into problems

You should absolutely get an Owner's Title policy. The cost won't be that much and for the piece of mind it is well worth it. If you have a Realtor working with you, they can meet the inspector. I would recommend going out there yourself as well (unless you've already been). Buying sight unseen is not the best way to go.

Rob, the deal sounds good. Douglas Christian seems quite solid. My concerns are your lack of experience, low cash reserves, combined with the long distance, and that you aren't going to GA to check it out for yourself. Consider the trip as an educational investment.

This may be a deal you should do, but if I were in your position I would go see for myself.

Originally posted by Jon Klaus

Rob, the deal sounds good. Douglas Christian seems quite solid. My concerns are your lack of experience, low cash reserves, combined with the long distance, and that you aren't going to GA to check it out for yourself. Consider the trip as an educational investment.

This may be a deal you should do, but if I were in your position I would go see for myself.

I do have 9k in reserves and i do have 2 other properties that are long distance one in Tennessee and one in San Antonio TX they are ran buy PM is there going to be a problem getting duplexes managed by PM flying what would flying out do for me and if i do fly out what should i do when i am there

"I completely disagree with Mark and Jon."

What, you think Douglas is taking him for a ride? :lol:

You already have out of state investments so you know what you are getting yourself into and are obviously comfortable with that. I live in San Diego and invest out of state where I can get tremendous cash flow. I say go for it. Real estate can be passive and you are hiring property management so you do not have to deal with the daily hassles.

The numbers seem to make sense and you have accounted for management, repairs and other expenses. I would factor in vacancy but it is good that you have some reserves. My advice is to just make sure you do thorough due diligence on the condition of the property, due diligence on the management company and vacancy rates in the area and with similar properties. Make sure you are prepared for all worst case scenarios.

How is the LTV? I recommend to stick around 50% LTV and never go over 70%. That way you can unload it quick if you have to or hold, basically you have many exits. Rents I like when they are 2-3% of purchase and yours is 2.67%. Could be a fantastic deal.

One thing to consider is there are 4 units so there is a chance more than 1 unit can be vacant. Those numbers would be better with less units and less potential for vacancy. Do your homework as it appears you are.

It blows me away how many investors ask for advice on a deal that has terrible numbers. It is nice to see a solid cash flow deal and good for you for asking advice, it never hurts and actually allows you to mitigate risk. Best of luck, I would love to hear how it turns out.

No pre-payment penalty on the loan I assume? Any chance you can up the rents?