My girlfriend and I are going on 5 years, and of course facing the big questions about tying the knot from family and friends. However, our motto has always been, "We're not getting married until we buy a house." (And by house, we mean multi-family home). Recently, GF's boss (a wealthy older gentleman with 30+ properties and several successful businesses) told her about a property he's looking to sell. It is on 2.4 acres of property, on a semi-private road, great school district, close to shopping but quiet, safe neighborhood. He obtained it in a deal years ago.
The property holds one 100-year old farm house converted into 4 units (3-1BR, 1-3BR) and a 40-year old brick apt. building with 4-2BR units. All units except 1 are currently occupied, which would work because we are living with our parents in order to save up. The property brings in $100,500/year. The owner lives about 2 hours away so to avoid vacancies and issues he includes all utilities including OIL (about $17k/year), water, garbage, and electric. The net income is about $55k/year.
There is no price tag, no asking price, it's not even publicly on the market. The assessed value is $385,000, and we happen to know it's going to need a new boiler ASAP. Septic was done in the last 5 years and the income potential is there.
The best part is that he has offered to hold the note. So I need some professional advice. After paying the taxes & insurance (~$1,900/month) and other utilities (~$1,826/month) and putting $1,000/month away for maintenance & repairs, what is a reasonable offer?
We would like to offer $2,500/month to cover a 15-20 year loan at 4%. I know that sales vary greatly depending on the area, so let me know if you would like to lend me some advice, and I can give you a closer idea of location.
Thanks in advance, BP community!
Nice that you get an opportunity, now evaluate the numbers before doing anything. Value and price is about chase flow vs expenses. It is not about the assessed value by the town. Your offer should be based on the rent vs expenses and figure in capitol improvements (another words what is your cost with repairs). Make sure you consider it including the value of your housing in the equation. If he is looking to hold the note under what conditions? What repairs are needed ? Are the heating systems separate per unit or is there one boiler? If you want to shift the oil you need to figure out how to do that. Could be expensive and you might be better leaving it be and go to more energy efficiency. It makes the most sense to make an offer of a particular amount rather then a payment. Down the road you can refinance if you want to.
I would not commit to an amount but rather say you may have some interest and see what his timeline and expectations are. He didn't get to be a wealthy businessmen by not being savvy about his properties. Ask why this one and make sure you see rent and expenses before making an offer.
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