Hello All. Just looking for some advice on my first property.
So this is a for sale by owner property....basically just turns out to be a guy i know who is looking to cash out of his investment after about 10 yrs. The property was building the 70's its a 3 story triplex with a 1bed 1 bad ~700sq.ft. per unit. There are 8 buildings like this on the street and it is in a very nice gated community. Its not in the best shape but he has remodeled 2 units in the past 6 months with the 3rd unit being finished soon. This building has foundation problems and can only be sold with Cash or conventional loans because of it. I plan to get conventional financing and put the 20% down.
right now the units are being rented out for $625 mo. for bottom and middle floors. The tenants are on separate electricity but the owner is paying for the water which is a min. of $120 mo.
There is a property across the street for sale for 125k.. he said himself that was too much and mentioned lightly he would sell his for 110k. I want to make him a strong offer that would work out for both of us but i'm looking for good cash flow.
Long term... its a little scary knowing that these buildings are so old and may need major replacements roof/siding/heating or air.
-Does this seem like a good investment?
-how much should I offer?
any additional advice would be appreciated! Thank you
If you end up putting an offer in make sure to have an inspection contingency. Don't be afraid to bring in a basement foundation repair company and get a quote to get the issues identified and fixed.
20% of 110k = 22k Down
110k - 22k = 88k Financed
88k @ 4% for 30 years === Monthly Payment of $420 (principle and interest)
Other Numbers you'll need:
Property Taxes (get on the county website)
Insurance (just call an agent or ask owner)
Repairs ( Really depends on condition of property, 10-15%)
Utilities (get as many months of bills as possible)
Property Mgt (even if you plan on doing this yourself)
vacancy (depends on market and property, 10%)
Cap Ex (depends on property but sounds high on this building) 15%
These are VERY VERY rough numbers but lets look anyway...
Gross Rent- 22,500 (assuming all 3 are rented at 625 and no washing machine income)
Taxes- 2,200 ( I figured 2% of home value)
Water 1800 (150/mth) Look into heat bill
Prop Mgt 2250
Cap Ex 3375
22500-19140= 3,360 Cash Flow Yearly
Investment of 22,000 / 3,360 = 15.2% Return
Plus tax advantages, paying a little down on mortgage, possibly appreciation, learn a lot.
Location, Basement, Local Market, Comparable properties, and firming up numbers ALL need to be looked into.
Let me know what you think!
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