Hello BP users,
I used to live in Rhode Island and moved to the Boston area. I have ran into a possible deal in the providence area that I am very interested in. I would like some help trying to analyze this deal.
I don't know where to begin. it is a 2/3 family ( the 2 upper units where converted into one unit). The seller is from out of state, also seems to be a part time real estate investor. he gave me the expected rent, and section 8 approved, by looking around on trulia at rents being asked for in the neighborhood and what he stated seemed to correlate. I just don't know where to go from here. The home seems to be great for the 2 percent rule.
I do see the home was purchased at an auction a few years back then sold again for 1 dollar about 2 years ago, and last year the county assessed it at about 80k he's asking for 115.
I know I am very vague I just don't know what information to actually give as I haven't analyzed it yet. I just need help in the right direction towards what to keep an eye out for, what questions to specifically ask, and sort of where to go from here.
If it works out and the numbers make sense since he did want this home for rental income, he is just out of the area I was thinking about asking for seller financing? is this a good idea or bad one? this would be my first home so I am completely new at this.
Sherwin, a few thoughts.
First, what is your plan for this property? Is this something you are looking at for a buy-and-hold? If so, I would first recommend doing your own rental comps (looking at actual similar listings on CL and other sites) instead of taking what the seller says are expected rents.
If the seller bought it at auction, did he rehab it? If so, you will want to check if he pulled permits for the work - if he didn't, you could find yourself having to rip out work that he did and should have pulled a permit for (yes that really happens).
Also if you are looking at it as a 3 family (or he's telling you it can be rented as a 3 family) you need to check with the building department (not the tax assessor) for the town to find out the "legal use".
What excites you about this particular deal? Do you think he's asking below market value for some reason? If so, what makes you think that? If he's asking market value, what makes this property better (for you) than any of the other multi-family properties on the market?
It's never a bad idea to ask for seller financing, but you may want to check the online land evidence records for Providence to see if he has a mortgage and if so, how much, because he may not have equity to give you seller financing even if he wanted to. Also, it's always a good idea to do your research on a property/seller before negotiating in any case.
Hopefully these are some helpful questions / issues for you.
I am looking to primarily buy and hold with my investing career, focusing on cash-flow more than appreciation. I seen on a few forms online for the building that it is a 3 family if that is what you mean?
I do not believe he is asking below market value, I think he is asking about market value because it does need some updating. I have been looking at multi-family homes in Rhode Island and Boston and this one just seems within reach, it seems like it'd be easier for me to manage then some of the other homes I've looked like and it really does look like an opportunity for me.
It seems like he may have a considerable amount of equity in the property. I did research on the seller and actually found quite a bit of information ( scary how good google is). I did some research on the property and tomorrow and talking to a sort of mentor to help me analyze the property to see if its worth it. I will also be calling the building department in RI to see if permits were pulled for the work because work has been done on the house.
Thanks for your help Anthony,
I set up an appointment to go see the house on friday, ill let you know how it goes!
Keep us posted. What neighborhood is this house in? Also, what makes you feel like this would be a good deal and how much work does it need?
Sherwin, What @Anthony Thompson said was this:
"Also if you are looking at it as a 3 family (or he's telling you it can be rented as a 3 family) you need to check with the building department (not the tax assessor) for the town to find out the "legal use"."
In more detail, this is what he meant:
Frequently on MLS or on the Tax Assessor Record or on Zillow or where ever, you will see a property listed as a 3 unit when it can only legally be used as a 2 unit. Just because almost everyone lists it as a 3 unit, doesn't mean it is. The Building Department can tell you the legal use of the property. Not the tax assessor or any online documents.
Why does this matter? One of the most important is that if you have a legal 2 unit, and rent it out as a 3 unit, and have a fire, or worse, an injury or fatality, the insurance company can refuse to cover you. Or, you can get an order from the building department to shut down the building or remove one of the tenants.
So no, "I seen on a few forms online for the building that it is a 3 family if that is what you mean?" is not what he meant.
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