I'm a new investor and looks like will make my 1st investment property in my life. But now the situation bothers me a little bit, so need you guys advice, please!
General information: Multi(2 units) in west new york. Almost 100 years old house. Occupied. Good rent income.
I made the offer $8000 less than listing price. Owner accept immediately. After home inspection, the condition is not that good but acceptable, has Asbestos problem, missing insulation on the roof, couple of pipes need to be replace and also water heater tank, the basement has bathroom but no permit. Seller is willing to give $5000 credit. But I have to take over all the tenants. One lease will expire next year, another lease is month to month. I met these tenants before they are "looks like" good guy, but you know...
Now my concern is , the owner is a agent. This property can get 10% return yearly, which is very high in that area. I don't know is there any tricky part , cause I can't check tenants' credit score, if this return is really that good, why he wants to sell it? Is this common?
Please give advice, thanks a lot.
There are a million reasons to sell-
Tired of being a landlord- wants to trade up to a larger property- wants to move to a different area- wants to retire and cash in- has to pay for kids' college- wants out of a particular market.
Reasons for selling from the sellers we bought/ are buying from- they bought high are were tired of losing money, daughters selling off parts of the estate, retiring and tired of landlording, reinvesting into another area, and another one retiring.
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The 1st investment is always the scariest. You had the inspection, go with your gut. Make some mistakes, learn from it, then buy another one. It gets easier. And more profitable.
The best thing about bad tenants is they can be evicted.
Nick C., Circuitous Realty | [email protected] | 7274750107
@Jennifer Wang - as others have alluded to, there are many many reasons for people to sell their investment homes despite being lucrative and positive cash flow.
Now the piece of information that concerns me is the asbestos - it is a very expensive and time consuming problem to tackle and not every contractor out there is equipped neither willing to deal with it. Those that are would charge between $200-400 an hour to remove it. You can get the picture: if the house has asbestos everywhere, it might cost you a lot of $ to remove it.
Questions for you:
- Why this house?
- Market comps?
- Is this one much cheaper than others for sale in the same neighborhood?
- If you don't get this one, will you be able to purchase another one in similar/better conditions?
Good luck with your project/purchase!
Thanks guys! So many helpful advice!
@Jennifer Wang To answer your question, if the owner is an investor they are selling likely because they got the property for less than what you are paying and can do that again and again. It is one of the advantages of being local. That doesn't mean it is unfair to you.
I'm from western NY. Mind sharing the address? 10% doesn't sound amazing, but it depends on the area. It could be a good deal.
Thanks for reply. This is in West new york, NJ, not in western New york.
1. Get a quote for the work that needs to be done. $5k seems low.
2. Ask the seller to turn over the credit / background checks or see if they will allow you to perform them. The month to month etc. I believe you can require to fill out an application and do a check on them
I agree with @Chris Seveney on getting quotes, multiple in fact. This could help justify enough to push that return > 10%. Hopefully the repairs are moderate in effort so that the returns stay attractive.
Originally posted by @Kathy Argento :
. Analyze, analyze, and over analyze. Ask many many questions etc.... Until you feel 100% comfortable you are not stepping into a trap.
This goes double, triple, quadruple, 10X for your first one.
Originally posted by @Jennifer Wang :
This property can get 10% return yearly, which is very high in that area.
Is it actually performing at that rate, or is that what you think you can get? The numbers in your initial post are vague, so it's hard to say whether it's a good deal. I just posted a blog about understanding numbers last week. Here is the link if you are interested: http://www.biggerpockets.com/blogs/6815/blog_posts...
Hope it helps!
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