First Deal Review Please

13 Replies

Hey everyone.  I have a deal that I am looking at, and I would like all honest opinions...good and bad.  This would be my first venture into real estate investing.  My focus has been on purchasing multi-family as a buy and hold investor.  Here is the deal.

2BR/1B Duplex for $49,900 currently renting both sides at $500/each for a total of $1,000/month.  These are new 1 year leases that have been signed.  Seller is offering owner financing.  

I like that the owner financing is available which would allow me to get in without having to go apply for a mortgage.  I'm currently checking into the terms for the owner financing.  It also passes the 2% rule which I like.  I also like that it currently has tenants so I would not have to prepare the units to be rented and would immediately start to cash flow.  

Location is good based on proximity to the Navy base in town, but the neighborhood is suspect with a mixture of decent houses and run down houses.  I would be buying for the cash flow, and not resell value, but I also don't want to be in a declining neighborhood either.  It sits on a nice corner lot with woods across the street and to the side and back of the property which I like.  The property to the right however is abandoned and boarded up.  

Please let me know your thoughts on this!

thanks,

Matt

Oh crap, missed that abandoned property next door part. Yeah, dont buy.

Never buy next to a board up..

Drugs and bad behavior most likely going on in there..

In the winter the bums break in, light fire's to keep warm ( maybe not in florida ) and if it gets out of control-- Bye Bye to your house.

If it stays boarded for a while, and for some reason you need bank financing- some banks will not lend to homes next to a board up..

Hi @Matt Spitsbergen  

Numbers look good on paper.

I would try to find out what is the actual market value of the property? Have your agent run some comps to get an idea about the market value.

Is there a lot of sales activity in the area? How many abandoned houses are there on the block? I would drive by the area during day and after dark on weekdays and weeknights to get a feel about the area.

The deal also depends on how good of an owner financing deal you will be getting.

Good luck!

Sharad

Medium logoSharad M., REsimpli | [email protected] | 619‑786‑3482 | http://reSimpli.com | Podcast Guest on Show #155

If its just the neighboring house and not the whole area boarded up, why don't you try contacting the owner of the abandoned place next door and see if they're interested in selling? Even if you don't have the cash on hand to take on two deals, you could pass it off to another local investor who will fix it up.

@Sharad M.  makes a good point though. If the whole area is on the decline and their are multiple abandoned properties you should probably seek greener pastures. The revitalization of a neighborhood is a job for the local government not a local investor.

This is simply my opinion and i have never actually bought next to a boarded up building. But depending on your end goals it could actually provide an oppurtunity to obtain several houses on the same block. Which gives you a chance to build up your block at least grasses cut places fixed up etc. something i have thought about.

630‑370‑7422

@Robert Zavertnik  Uh yeah, It aint the governments job to revitalize neighborhoods. Thats the problem with the world today, everyone thinks its the governments job. 

@Benjamin Timmins  Don't get me wrong, I agree with you.  I'm just saying it's a fools errand for a beginning investor to try and redevelop an entire community.  By saying it's the government's job to revitalize the area I mean they must attract business, control crime, and stimulate growth. 

Yeah, I thought about pursuing the boarded up property as well.

Also, it was the only one I saw, I did pass a fairly new Habitat for Humanity house on the same road. Like I said, a mixture of decent houses and not so decent

Originally posted by @Robert Zavertnik:

@Benjamin Timmins Don't get me wrong, I agree with you.  I'm just saying it's a fools errand for a beginning investor to try and redevelop an entire community.  By saying it's the government's job to revitalize the area I mean they must attract business, control crime, and stimulate growth. 

 Totally agree.

Originally posted by @Matt Spitsbergen:

Yeah, I thought about pursuing the boarded up property as well.

Also, it was the only one I saw, I did pass a fairly new Habitat for Humanity house on the same road. Like I said, a mixture of decent houses and not so decent

 Guess it's all what your looking for. You will definitely have to screen tenants hard. Not just use the sceening services, but do your own digging as well. Contrary to popular belief, screening services miss a ton. Theres no national database that they can get access to. NCIC is only available to law enforcement, and even cops cant look up people on it without a reason. My brothers a prosecutor down in florida. Asked him to look me up in it for kicks. Said he would get fired if he did it, and had actually had colleagues that had gotten fired for it.

This may be a reason why the sellers, in frustration trying to sell, are willing to consider seller financing.

Having a vacant, boarded up house next to a rental may not be a major problem if the overall neighborhood is appealing. I purchased one of my favorite houses in seller terms based on same situation.

If people are breaking into the the board up, that's a separate problem. I say, turns that into an opportunity, too.

I would make an offer on subject property to tie up, and concurrently work diligently to determine who owns the board up. If bank owned, probably no opportunity for seller financing. If owner is located, make your best deal and press their liability for break-ins, etc. If deceased, you know where that leads to...

awesome ideas from everyone. I love the idea of contacting owner of boarded up place and trying to pursue owner financing.

630‑370‑7422

Great points here. In my personal experience and opinion, if I knew the neighborhood and the numbers worked out for me, I would buy knowing that I am an active investor/owner/manager. I would get to know the local authorities who patrol that area and ask about the activity, if any, of the abandoned property. I'd work proactively with them, including trying to buy that abandoned property. See if it's on the city's list of code violations and what can be done to fix the blight. 

It all comes down to how active of an investor you are or want to be. 

Hope this helps. Good luck!

Tim

Medium realcap 022Tim Soto, RealCap | [email protected] | 805‑794‑9433