So I am a young investor just starting out in Northern Colorado. I currently have 28k in the bank, but work on a commission only job, so I can't get a conventional or FHA loan for another 8 months or so. However, I want to get invested now.
I've had an opportunity present itself, but I would love to hear what others think before I pull the trigger on this. There is an investor in Greeley that is willing to structure a deal on a townhouse in greeley. The terms of the deal:
- 20k Downpayment
- 1400 a month in interest
- I have an option to buy the property at 220k at anyt time when I can actually get a loan
- He is willing to partner with me and split expenses and profits on the rental so this is an option I could either us or not use
The property is officially a 2 bedroom 2 bathroom 1600 sf townhouse a block away from UNC, but there are 3 unconventional bedrooms in the downstairs. He believes we could rent out the top of the house for $1,000 a month and the 3 bedrooms downstairs for $500 each to college kids for a total of $2,500 a month. We would have 2 leases in play and only accept college kids without cars, so parking doesn't get congested.
The property has been remodeled within the last 2 years and was built in 1984 so I don't expect too many problems.
HOA is $100 a month.
So I would be cash flowing 2500 - 1400 (interest) - 100 (HOA) = $1,000 which I could partner and split with the investor as well as splitting any expenses for cap X.
Lastly, I think this is a pretty good deal. I need to read up on if I could legally rent out the top half and bottom half in Greeley. I also did some research and I believe the townhouse is worth 170k due to other comps that have sold this year and also been remodeled.
I'm going to look at the property with the investor today. What I'm thinking is I say I'll put 7k down, pay 170k for the property at 4.5% interest payments each month and still partner with him so he is more willing accept these terms because he'll be splitting the profits each month.
Any and all help is greatly appreciated!!
Sorry I forgot to mention the downstairs has a walkout basement, so the tenants downstairs don't have to disturb the tenants upstairs
I don’t know how hard it will be to find 3 college students without cars, Greeley’s city transport system isn’t that good. Also, not sure how you’d know before you rent them. Ruling someone out because they have a car isn’t exactly legal.
The rents might be a little low. I have a 1 bed/1 bath in West Greeley and I easily got 1150/mo. Once these tenents move out, I’m looking to bump it to $1250. Have you checked local rental prices?
Is he charging what you believe is a fair interest rate? Have you penciled it out to see what it is? If you could find a bank that would do the loan with 10% down, your whole payment would be less than his interest payment. (You won’t find one with 10% down unless you move in as a tenant, but you’re proposing less than 10%. Just looking at the #’s, payment seems high)
Check the zoning for this property if your plan is to rent out the basement rooms separately. If its more than a block or two from campus then Greeley's limit on the number of unrelated persons comes into play. When I was looking at properties there I did speak with the city and they said that they do enforce the zoning restrictions and that landlords that played by the rule do call and report those who don't. So be sure your plans are consistent with zoning for the property.
Jon is right, zoning is strict in Greeley, all it takes is one neighbor to complain.
How are you structuring this deal? Is it owner financing, interest only? How do you plan to get out of this financing and actually pay down the property? If the comps are 170k why would you buy it at $220k?
I think $500 per room is ambitious for a basement apartment, especially without parking. Would it have a separate entrance and utilities? If not, then you're gonna have those issues to deal with as well. The people downstairs aren't going to want the upstairs people controlling their heat if they are paying for it.
If you are zoned for medium or high density, I think you're more likely looking at a townhome that could service 2-5 students for 1400-1700. Maybe more if it's a newer place with amenities, but most stuff near campus is older.
Personally, I'd try to get this place for much less than $220k or look elsewhere.
The rents in west Greeley and east Greeley are very different, but the school zone is better than the rest of downtown/east Greeley. Your numbers are kind of all over the place and raise some questions. $500/room is reasonable for a nice two bed place near the college, 3 bed - maybe- but likely will have to go closer to $400/room. I just know I haven't seen a property come on the MLS in quite a while that would cash flow with fixed rate financing and low money down.