question? Thinking caps on!

6 Replies

Hello everyone,
I have come across a quadplex (2 for $550 and 2 renting for $650. all units rented with 8 months or more left on lease) been there, in excellent condition inside and out. good tenants. seller asked for $305 but the inside scoop is she will accept $250,000 in cash for a quick close. My ole credit score , she aint what she used to be (630 to be exact) How can an ambitious slug like me give her $250,000 cash and a quick close? I need you fella's expertise and fast on this one.

Well severett; I don't want to be a cloud on such a nice day for a parade but.... The question here isn't HOW but WHY?

It GROSSES $2400/month or $28,800/year. I know everyone says "don't look at anything that doesn't gross at least 1%/month of cost" that's only the first cut and IMO it's a way to sure ruin.

I don't know what taxes, insurance, maintenance, utility and turnover costs you'll experience, but I can tell you they will drop your return down to about 5%, about what you could get in a CD or money market. And that's based on "cash on cash" numbers, with no debt.

Unless you KNOW that REAL MARKET rents are about $200/month/unit higher and KNOW that you can jack your rates to that without undue turnover I'd pass.

BTW, the last time a "true insider-in the know-with the real scoop" told me a seller (also the listing agent) would go as low as $60K for a quick close I offered her $44K and got the place for $51K.

all cash

I agree 100% with All Cash. If you're going to have a mortgage for the purchase price, I wouldn't pay one penny more than $120,000. At a purchase price of $250,000, you would lose about $550 per month on this "deal". OUCH!

That sounds like a quick way to go broke!

Mike

That is exactly what I need fella. Thanks. Sometimes I got to hear it from somebody else. How could this become a win deal though to include a substantially lower offer? Thanks in advance.

In all probability, this will not become a deal. I'd simply move on and look for a real deal. There is no "win" here unless you can buy for less than $120,000. The owner probably owes $250,000 and is losing her butt on this rental. Now, she wants to pass it on to you. She probably doesn't have $130,000 to bring to the closing, so she can't sell it for $120,000.

The fact that you were considering this "deal" tells me that you aren't ready to buy anything. You've got a lot more studying to do if you are going to be successful.

Good Luck,

Mike

You are right. I do got a lot to learn. But I know enough to get answers before I do something I would regret later. Thanks for the assist. Will look to you for further guidance in the future. Take care out there.

Originally posted by "severett3594":
You are right. I do got a lot to learn. But I know enough to get answers before I do something I would regret later. Thanks for the assist. Will look to you for further guidance in the future. Take care out there.

It is a breath of fresh air when newbie investors see that it isn't as easy as it sounds and seek help. I'm glad you asked before jumping in on this one. At some point, however, you'll need to be comfortable enough with your knowledge that you'll know a good deal as soon as you hear it. Do some quick calculations in your head and jump on the deal. Keep asking and reading . . . you'll be there soon!