Hello all my name is Robert and I have recently decided to start investing in real estate after a lot of reading and research. I have found a property and it is a 4 family. All the apartments have 3 bedrooms 1 bath. The rents are 1000 a month per unit. Taxes are around 8500 and the landlord pays for heat, sewer and water. Water and sewer is around 200 a month according to the landlord. He has owned it for 14 years and his partner moved away. The landlord says that he is not a handy person so he does not want to do it anymore. He is asking 250,000 but is looking for as much cash down as possible to avoid the big tax bill because he has no expenses to write off anymore. He said he is willing to drop the price down to 150,000 if I put Enough Cash down. He is willing to do owner financing but the only down fall is the house is in a poor town that is known for poor people. So as a first time buyer I am looking for input on the deal from people that have more experience than I do to see if there is anything I may be missing. Thank you all.
Also The house does need some exterior work. It needs a small deck replaced and siding, which off the top of my head would be around 16,000 for all the work if it is done be a contractor. The current owner said he would have it fixed if thats what it took to sell it.
Looks like you're identifying some downsides to this deal. What kind of market are you looking in? Is this the "best" deal you've found or might there be better ones that come on the market from time to time?
I would be sure to get more information on the tenants e.g. get an idea of what kinds of leases they are on, whether rents have increased steadily over time. Do research of other similar properties and try figure out if $1000pm is high / low / average for the market.
You may also want to ask questions about major systems in the house (heating, cooling, hot water, roof, etc.
Just some ideas and thoughts. Good luck.
I don't like the "all" utilities being paid in your name. That can get expensive FAST, when they have no skin in the game! A poor town is going to have hard exit strategies. While you could do awesome, there are alot of interesting variables. Just make sure the cash looks AMAZING because that is going to be the key with this place!
Well can't there always be a better deal? This seems to be a good deal from the outside looking in. I don't want to stop at just 1 property as of now. when ever I do anything I cover as many bases as possible to maximize avoidance of any unforseen problems. I do intend to get more information from the guy and want to look at the property in details just so I can be clear of the income and expenses. I want to see the living conditions of the tenants to get a better idea of what this place is attracting. Thank you for the input!
There are a few things that aren't adding up for me.
If the town is poor, then rents of $1,000 per month seem high.
Taxes of $8,500 also seem high for a property in that price range.
I smell something fishy here. There are a few unscrupulous sellers who are short of cash and will seller finance to rookie investors and then foreclose to get the property back. Meanwhile, they keep your downpayment.
I have no real reason for suggesting this, other than gut feeling from what you presented. Something just doesn't add up.
Hope I'm wrong. If I'm right, I hope I saved you from a bad experience.
I was kind of curious about the guy trying to pull a fast one on me. I am going to look at it today and I asked him to bring proof of the bills. Then I am going to talk to my attorney if I like what I see
the taxes are 9500 a year I saw the bills first hand. Electric is 35 a month and oil for heat is about 1200 a month for the winter months. water and sewer was 300 for the quarter. The profit I'm getting would be 19000 a year after expenses 12% cap rate if I can get the property at 150000. It does need work and I'm hoping I can use that to my benefit.
Robert, taxes actually sound right or low for New York State but the rents do sound high for a depressed area. First thing that comes to me is all the "deferred maintenance". Cool buzzword for the fact the owner has collected rent and paid the bills but hasn't really maintained the property. Do your due diligence and get real documentation on this. He pays the bills since he probably never installed separate metering, hot water heaters, furnaces, etc. That may be why the rents seem high.
If you haven't parsed through it yet I highly recommend the BP "Ultimate Beginners Guide to Real Estate Investing" available under:
Learn>Free How To Guides>Ultimate Beginners Guide to Real Estate Investing
Another good resource but I think you might have to buy it is Ken McElroy's "The ABCs of Real Estate Investing"
It's really all about due diligence and running the numbers.
I have read most of ken McElroy book. half of the utilities are seperate. Heat and water are the only bills and the land lord electric panel is 35 a month. I saw the current owners bills from the previous year. There is seperate water heaters seperate electric meters. The 1000 a month seems to be about average for the area compared to the comps. it is not unusual for the county we live in to have 1800.00 dollar rents. The cheapest comp I saw was 850.00 a month for 1 bed 1 bath apartments.
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