6 unit owner financed for 110k

7 Replies

Hey all this is actually my first real forum post. We are in the middle of purchasing a 6 unit for 110000. I know it is really cheap but it's in a very depressed area, the previous owner is willing to stay on as property manager for a fee. The initial number he threw out was 300 a month. All of our current units I manage so i'm not actually sure what to pay a property manager. The gross rent is 3300 a month but we pay gas and electric, the units are fully rented all the tenants have been in the building over 2.5 years. I'm not sure what other info I should provide, oh the taxes are about 2500 a year as is the insurance. The note is 20k down and a little over 1k a month in principle and interest payments for 10 years. He offered a 7% interest rate. Well don't want to flood this with to much information but anything I should look out for before we finalize this?

630-370-7422

Philip,

Not sure how much I can personally add, however my research is for central IL. 

I personally have SFR's and my last purchase came with a property management company and since I am thinking of moving out of state...

Anyaway, my research indicated that property management was between $50 and $75 a month depending on a variety of factors.

Hope this helps a bit!

-Steve

Most professional property management companies charge 8-10 percent of collected rents.  Some will discount further once you hit a certain number of properties with them. Most do your monthly rent collection, prepare an owners statement, rent vacant units (usually for a fee) , screen tenants, field all tenant calls and send out repairmen up to the amount you authorize.  Good ones also inspect on a regular basis and send you reports of condition with pictures  and make recommendations.  Mine recently suggested a minor change and it enhanced my monthly income significantly.

Since I now live more than 1000 miles away from my rentals I couldn't operate properly without them.  i have used this company for nearly 10 years.

Hey steve were those number for a duplex or a single family home perhaps? That sounds reasonable to be but seeing as this is a six family there are higher costs I would assume. Thanks for the help!

630-370-7422

Thanks a lot martin that would run my monthly property management fee to about 300 for that building. I am close enough to actually do it myself but I wanted to concentrate my efforts more on expanding my business rather than simply taking calls to fix locks and collect rent etc....

630-370-7422

@Philip Williams  - So if he is willing to stay on as PM why is he selling?  Will he be providing his Schedule E or any other official documentation?

I have not done seller finance but I think 7% is a very fair rate

Brie Schmidt, Real Estate Agent in Illinois (#471.018287) and Wisconsin (#57846-90)

@Philip Williams  

Congrats on finding the property.  If you can keep it rented, it sounds like it will bring you solid cash flow.

For the agreement between your property manager and your company:

Put everything in writing.  Spell out exactly what is expected and how much it is going to cost you.

Who collects the rent?

Which party pays the bills?

At 3am, does the PM have the authority to pay $200 of your money to a plumber for an emergency fix?

How much money is in the contingency fund?  Who has access directly to these funds?  At what dollar amount does the PM have to call you about repairs ($100,$500, a new roof)

Lots of things to think about.  I'd put a proposal together and float it out here on BP.

He says he needs the money for a 16 unit he is in the process of purchasing. He doesn't have enough cash to rehab it fully. He is providing his schedule E and all documentation.

Thanks Aaron those were all great suggestions!

630-370-7422

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