Im in negotiations on a unique property. A 2 bed 1 bath 2 story house and a 1 bedroom ranch house on 1 lot. Being sold as a package. Both houses have recently been redone and are move in ready. Asking $65K...they are holding firm at $59k. One thing I don't like Is there is a well on the property that feeds both houses....although this could be a good thing as tenants don't have to pay water.
Figure I can get $600 to $650 for the 2 bedroom and $500 to $550 for the 1 bedroom. Tenants pay all utilities
Taxes are $1090 a year
Insurance for both - $600 a year (this is high but I like to be conservative)
purchase price of $59K with 20% down.
$47200 loan -- 3 year ARM amort. over 15 years with a 5.29 rate = payment of roughly $380 / month
I self manage. With these units being updated I don't see any maintenance of the bat...
$1100 in rents = Gross rents of $13,200
minus taxes, insurance and mort. payment = NOI of $6950 yr.
what % should I use for unforeseen repairs / vacancy--5% ?
With that 5% factor Im coming up with about $5,900 year in NOI
Seems like a good one to me....thoughts?
will your loan provider allow a loan under 50k?
Yes --- I have a great local portfolio lender. Has been a huge help! They are literally a 5 min walk from our house.
All our single family homes have been a purchase price of $40K or less.
That's one of the reasons Im a little shaky on this one. Purchase price is higher than what we normally go after...
How does the well thing work? Do you have to pay for water quality testing, etc? Is the property hooked up to municipal water at all? (Around here, some people have well water but it's just for irrigation, all the potable water comes from the city). I'm asking because if that's the only water you might have additional expense. Plus the issue of what happens if that well dries up.
other than that it sounds like a nice deal
Jean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com
The houses have city sewer but all water comes from a well that has a submersible pump...all the houses out in the "country" around here have well water and a septic system. Now a well is not really an issue...its the submersible pump. Im trting to find out the age of the pump. I think a new one runs around $2K?
I am willing to pay $100 to have the well water tested...but if test comes back bad seller would be responsible for a remedy, which is I have no idea what.LOL.
Also, I ve never heard of a well drying up...I guess you would just have to drill a new one?
@Craig Montesano wells do dry up, been there, done that ... And it is not a small expense. $5k-10k likely. The probability depends on many things so I can't tell you how likely in your case, but it sure hurts when it happens.
A submersable well pump cost about $500. for the pump itself .Labor to replace it is regional . I just replaced my own and it took me 2 hours (well was 100 ft deep) Now here is where you have potential for a problem . The house that has the well pressure tank also supplies the electric to the pump , if that tenant has their electric cut off , both buildings have no water . second , if there is a water treatment system that too is in the first house , who takes care of the chemicals. Another problem would be water pressure , if one house is doing laundry , the second house will have reduced pressure . If the tenants dont like each other , one person can shut off the others water.
I have a similar rental housing set up , and on occasion I have a complaint about low pressure . I solved the electric problem , I have a garage that I use as a shop and it is on its own electric meter , thats where the well is powered from .
Wow thanks for the insight...never thought of that. I do believe the water treatment system is in one house along with the pump and electric. That could be a problem...
sounds like a dry well could equal a dry bank account. That is a killer expense if the well does indeed go dry. Something to keep in mind while I negotiate
What does everyone think of the numbers?
There should be a tag on the well with a number on it , take that info to the local government and they may have the specifications on the well , the depth, the recovery rate , the age , and possibly the size pump , talk to some local well drillers , they can give you an idea as to the possibility of the well going dry . If you are in coal country this makes the possibility a bit higher , sometimes a new shaft will change the ground water flow effecting a well .
A friend of mine is in Confluence Pa , his well is 1300 feet deep , and it produces 2 gallons per minute , he has 4 Large pressure tanks to have reserve water .
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