Sup yall! I'm a new investor with one property under my belt. I have a fourplex I got for 150k in Tuscaloosa, AL and I'm living in one unit and renting out the other three. I'm saving $1000 a month from not paying rent. I'm saving the freed up money to get another property and do minor improvement to my property.
Okay my situation. There's a duplex located next to my property and the owner wants to sell it to me for 60k, down from his original price of 70k. The duplex appraised for 105k so I would be buying into equity. He wants to sell it quick because he is retiring this year. He is renting the units out for $475 each which is cheap because my units rent out for $550 and we both have the same sq footage and number of bedrooms/baths. Here are the numbers:
- Appraised price: 105k
- Selling price: 60k
- Estimated closing: $15,920
- Rehab: unknown haven't gotten an inspection yet. Plan on fixing as I go since current tenants report no problems after talking to them
- Rent: $475(2 units) with current tenants. Can rent for $550 each
- Cashflow after expenses on $475 rent: $55 per unit
- Cashflow after gradual rent increases to $550: $97 per unit
- Cash and Cash return: 8.3% without rehab numbers
- ROI: $237.4% without rehab numbers
I don't have $15,920. I have a personal loan of $9,841, of the $12,200 total loan, in my bank account from a failed unrelated business venture that I'm paying $200 a month for that I can use:
- Would it be smart to take out personal loan to help pay the purchase cost? I can cover the loan payment with my personal money but is it smart to tie up $200-$400 a month of my personal money for 5-7 years. This wouldn't affect the $1000 month I'm saving already.
- Is it smart to invest in the property based on future cashflow because currently the cashflow isn't the minimum $100 per door?
@Edwin K. Before you access a personal loan or LOC contact your lender to ensure it is acceptable. We have many programs that do not allow any portion of the down/closing to come from debt and I suspect your lender may as well. Good luck!
If you can’t afford the closing costs, you can’t afford to buy the house, period.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.