Two properties, One deal.
I have found another deal that is a bit outside of my comfort zone for two reasons: 1. It is outside of the market I know. 2. It is one price for two properties. I will break down the numbers now:
1 SFH renting at $700/mo. 1 4 unit multi-family renting at a combined $1850/mo. Total income is $2550. Properties are in the same general area. They are located in Kansas City, MO. Seller is asking $85,000 for both and is not willing to take less or finance.
Calculated expenditures are as follows (some as stated by seller, some confirmed):
Mortgage (80%): $448.77/mo for 20 years at 5%. (calculated by me)
Taxes: $116/mo (confirmed)
Insurance: $54/mo (stated by seller)
Water/Sewer: $200/mo (stated by seller)
Seller gave some estimates of maintenance and vacancy that seemed low, so I replaced all other expenditures with 10% of rents to be safe, as shown below:
Repairs: $255/mo
Management: $255/mo
CapEx: $255/mo
Vacancy: $255/mo
Total expenses: $1390/mo
Total cashflow: $711.23/mo
I have talked to the seller and the only thing he worried about is getting the $85,000, not financing, and taxes. He is willing to work with me on other terms to make the deal happen. He is selling due to divorce.
I still need to talk to banks to find out how to structure the deal in order to get a mortgage that makes sense. The down payment will be gifted to me from my father, with no expectation of return (other than that I better take good care of him when he becomes elderly).
A couple of areas of concern: I have been talking to realtors and property managers to get an idea of the neighborhood. Most have told me that the area is low-middle income and it is not a bad neighborhood. So, I pretty much have to trust that, right? Are there other ways of investigating from afar? I plan to take a 1-day trip there (I am 3 hours from KC) to look at the property and the area, but that may not tell me everything I need to know either.
One of the properties (the multi-family) is listed with an agent now. Is that going to cause any problems making this deal happen? Anything we can do to alleviate those problems?
Another issue I see is that while the combined price is high enough for a mortgage, when you split that price between two places, neither becomes something most banks will loan on. Will that be an issue? Should I pay a lot for one property and much less for the other? How can this deal be structured to make it work in that regard?
I think this is a great deal and would really like to see it go through. I think this one will work as long as the banks will be willing to loan. The pictures of the places make them look nice and well maintained, but I won't know until I have seen it in-person and had property inspection.
Thank you so much for taking a look at yet another deal. Hopefully this will be the last one for a couple of years while I build funds to buy the next place.