I am currently looking at my first purchase prospect, though still keeping options open to others. It is a 4 unit in a small town. So low crime rate. Viewed it Wednesday, it seems pretty much ready to rent, other than new locks for personal security reasons. Currently winterized so will check all pipes and wiring ect before any deal is locked in. But all cabinets and counters tops are good, appliances included except washer and dryer for the 2 units setup for them. So seems to be all but turn key. Asking 79,000 the 2 units with 1 BR 1 BTH are rated at 450, the 2 units with 2 BR 1 BTH are rated at 550. As part of the FHA loan i will be living in one, I plan to be in a 2 BR as I will be getting married in 1-2 years while living there. If I do make an offer, I plan to start low, say 58k? Or is that too low?
It has been on the market for 3 years I believe, and the owner's niece is selling for him as he is 94 years old and she is settling his assets. So she has not had any tenants in house as she does not want to be a landlord.
What should I look out for, as well as what improvements should I look into to help attract good tenants?
Thank you for any help, and God Bless all of your business endeavo
Do you have a real estate agent working with you? They would be a great resource for your questions as those questions should be answered by an expert in your vicinity. Agents and Brokers know what renters will want to see in a rental unit and should help you think through all the things you should be looking out for!
Be sure to look into expenses for that particular property and try to find out why no one has bought it after three years. Has anything changed recently to make it a better deal?(Like a large price drop) The rent to cost ratio is good but that often doesn't tell the whole story.
I am working with an agent by the name of Steve Woolum, simply because his site is how i found this particular property. But he seems all smiles, no down sides, all is looking up everything is great. Which that alone makes me want to get as many opinions as possible, compare options an information before making a decision. As my first purchase of this size, I don't want to make a huge costly mistake that would poison my endeavours from the start.
One thing I noted when searching this property on different sites is that it looks like it dropped $10,000 back in March 2015. So perhaps that means they will be less willing to give on the current price. The closer to $60,000 the better. The small town it is located in is another example of the small communities that are dwindling away in terms of stores and small business. The old man that owns it, apparently also owns half the modest sized town and his heirs just are not real estate people. I will try to enquire deeper as to why it has not sold yet, but will wait until after tax time as those papers will aid the bank's approval. I don't want to seem like a "Hungry Buyer".
The small town aspect does not scare me as that is the kind of community I prefer to live in and know many others that are the same.
As a side note when trying to find tenants, what are the best advertising methods? I know papers are common, but I also found a couple websites specifically for apartments and rentals.
Thank you all and God bless
If you plan on living there first (house hacking), you'll have a great advantage getting started in the game. Run the numbers, check how much taxes are, and make sure you can get renters in there. Sounds fishy that a 4-unit is completely empty. Due Diligence is key in this deal, but this is going to be an ideal entry by the sounds.
You're going to greatly benefit from ValueAdd on this property, too. As each unit turns over, upgrading the kitchens and bathrooms will add more to each monthly rent. Even a modest upgrade can add $100 to each unit per month. Saving all your cashflow from Day 1 will pay for these future upgrades in time.
Good Luck and Best Wishes
Do not fear people thinking of you as a hungry buyer, because they likely will think you are an aggressive buyer. If the sellers are aware you are going to make improvements and hold the property for a long time, they will likely accept a lower bid. This is due to reluctance to sell family property to a "get rich quick" guy or the always evil "developer". (Insert evil laugh here).
If you can meet with the old man, do it. You will probably learn a lot from him, even if the deal falls through. If he owns half a town, he probably knows a thing or two about the business.
Most importantly, don't fall in love with a property. You will lose more bids than you will win, but if you stick to your plan, you will be successful.
Yup, I will be a live in landlord. Its one of the stipulations that the credit union gave for the FHA loan I'm quoted for. Semi-Taxes are listed by the realtor to be around $712 / 6mo equalling out to be 120 or so a month. As I make improvements over time, will that increase much? Hopefully at a lower rate as my ability to increase rent say once a year or between tenants depending on improvements.
Not "in love" with it,. But a great benefit to this one is that there is a very large attached warehouse (not garage) that will work very well for storage of materials for this property as well as other properties I hope to find in the coming years.
@Daniel Clem once you move in you can use Craigslists or even list it with the agent to receive pre-qualified tenants.
@Daniel Clem what I meant to say is you can list the vacant rental apartment with your real estate agent to receive pre-qualified tenants to select from. I would suggest using an agent as they will do all of the necessary marketing on your behalf and hopefully obtain a good tenant for you.
Just an update, I have not closed on a property yet. The one mentioned had an accpted offer put in literally days before I would make mine and was a solid one so I consider that one lost. Probably for the better as in learning more about renting. It was farther from town than ideal and would be farther for most to drive to work and hence slightly more difficult to keep rented. As well as I am finding that most all the multi family properties I'm finding are zoned commercial including that one and therefore will not qualify for a FHA loan.
So I'm continuing the search and looking into other options for financing. Interested in the concept of seller buyer contract sales but still only have a out 5,000 for down payment so that may not be an option.
Any input would be greatly appreciated. Needing a multifamily that will net at least 400-500 cash flow after all expenses in order to help save up for the next down payment on the second property 6 months to 1 year later.
Thank you all, and God Bless.
@Daniel Clem , keep looking, man. I had to look for over 9 months.
One thing to keep in mind if you decide to go the FHA triplex or fourplex route is the self-sufficiency rule, which states that 75% or 85% (depending on which state you're in) of the market rents on all units (including the one you will occupy) need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This rule only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies.
There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets.