owner financing with little or no money down...
both sides rent at 950 per side
price is 150k, 15 year mortgage at 6%
payments are 1265 monthly
buyer pays all closing costs which include transfer fees about $1200.00 plus
attorney fees approx $450.00 to $800.00.
Tax is $3600.00 per year.
Town water and sewer.
Sewer costs are $90.00 per unit per quarter.
Water is approx 100.00 quarter.
Below are few further details that would help us have a better understanding about the deal:
Age of the property?
Current condition - any required repairs?
Are these rents at current market rate?
What asset class is this area - A/B/C
Current job market trend- stable/growing/shrinking?
Desirability - school quality/proximity to expressways or commuter train
And finally....what has your market supported in recent comparable sale prices within the past 6 months. Is there high or low inventory available for sale in this asset class in your area?
Did you run this through the BP analysis tool?
Not sure on your local requirements in VT but you may need to pay for snow removal (~$800/yr), possibly HVAC maintenance on the A/C & furnace yearly (~$200/yr * 2 units), and with a multi family don't forget any common area electrical you might need to pay for, as well as insurance (house + umbrella), vacancy allowance, plus cap ex and a repair allocation each month.
The $1900 rent is above the 1% rule so offhand it could work but make sure to include all expenses and see what the cash flow will be. Definitely run this through the BP analysis tool or your own spreadsheet and see what your ROI would be as well as monthly cash flow. Brian has solid questions to answer as well.
If you have good credit you can probably get a 30yr am/15 yr due mortgage for around 4% right now, which might help you if the cash flow is tight initially. Owner financing at 6% is a decent option if you have credit or downpayment issues, though.
I like to make 3 percentage points above my cost of money. If your interest rate is 6% I would want to make 9% as a cap rate. If I apply a 50% expense rate I get a cap rate of 7.6%. Just on that it would not meet my criteria.
You should try to estimate your expenses by item and then recalculate. I would want a 9% cap rate.
@Bill Jacobsen if you factor in the loan cost in the amortization to come up with the monthly payment, would you not want a cap rate 8 - 10%, or whatever, above that?
I would add the cost of getting a loan to the price of $150,000. In the above case I assumed there was no up front cost.
I was not completely accurate. I see that there was some closing costs which should be added to the price.
Sorry for the mistake.