low income rentals

5 Replies

Hello All!

I am a new investor, focusing on small multifamily properties as an owner occupant. Forcing appreciation, new every two, and eventually moving to own a larger number of units. I have been doing research on this, and on bigger pockets.com, for several years altogether and I am finally ready to make my first purchase!

I'm currently active duty Marine corps. I'm using the VA loan to buy a 2-4 unit property. However, I have hit somewhat of a wall. I have been pre approved by my lender and actively searching for properties with realtors in south MS for about 6 months now. The problem is, almost ALL of the 2-4 family properties are lower income "C". I would like to stick with "B" class properties for several reasons. The main one being my family and I will be owner occupants.

Other than simply waiting around for another good multi to hit the market, or driving for dollars, etc, which i'm still doing- i'm currently left with two options:

1) Theres a "A" class duplex, higher end luxury, foreclosure that has been on the market several months. It only needs minor repairs according to the contractors i've had write up estimates. Comparable rents are 1000-1300 per month. Right now, one side of the duplex is occupied by section 8 paying only 800 per month, lease ending in Jan. 2016. The listing agent says there has been no interest in the purchase of the duplex so far, as the bank is asking top dollar 250k. The listing agent says to just make an offer, ANY offer, and the bank will likely consider, as the bank still owes money on the property as well. 

My realtor and I are thinking about offering 70k below asking. I've ran the bigger pockets rental properties calculator analysis, and that would be a good purchase price for my to make this property a successful investment. My question is, how low can I go from the asking price for a "reasonable" offer on this type of foreclosure?

2) I'm also interested in new construction. The small multi family market here is not very strong. So for me to build one would eliminate the incredibly difficult task of finding a decent property to purchase. I am looking to close on the mortgage BEFORE construction begins, so that all rates and stipulations are locked in now as opposed to over a year from now. I know this can be done, as i've ran across several articles of people who've done it. I just don't know if it can be done with a VA loan. Does anyone have any insight on how to close prior to beginning construction on custom builds?

Thanks in advance!

@William Donnelly

Your VA loan can fund new construction, in a round about way. You'll need to get in touch with a lender that has a lot of VA loan experience, not just someone that can do a VA loan. Long story short, you'll basically be setting up a situation where you get some kind of temporary financing to fund the construction to then roll over into the VA loan once complete. Definitely doable, but definitely a bit complicated, hence the need to work with someone that knows the ins and outs.

Best of luck finding the right property/place to build, keep us posted!

When we bought properties from banks, we didn't have much luck getting them to go significantly lower or to have a reasonable back and forth negotiation.  We would offer low ball, they would counter back with list price or very close to it.  But, you never know how desperate they are to unload, so I'd give it a try.

@William Donnelly

First of all, thank you for your service.

The duplex looks like an attractive option.  Your strategy sounds good.  Banks are very finicky.  I have seen them reject an offer for a certain amount, then lower the asking price BELOW that amount a month later.  They often give certain time periods i.e. a month or two, and systematically lower the asking price.  With this in mind, you need to sign up for a service that notifies you of a price drop (many realtors offer this) if they refuse your first offer.

This duplex screams AirBnB potential!  Last time I stayed in Biloxi, I was dissatisfied with the AirBnB offerings and ended up at a hotel.  AirBnB is more work though.

@William Donnelly

One other thing.  You can try to buy properties that are not listed.  Find a neighborhood you are interested in and look up the owners and contact them.  Network with other owners/landlords and you may turn up something.  I found some amazing deals just by networking and casual conversations with other landlords.

@William Donnelly - I would be skeptical of why one of the units is rented Section 8. If its a higher end unit that demands $1,000 - 1,300, who would agree to only $800/month. Have you checked out the rent rolls for the property? 

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