Possible first deal

5 Replies

Hello all I found a property I am looking into. I looked at it and it's very nice everything is recently updated. It is a 3 family and according to the realtors information it is a 2 2 bedrooms and 1 1bedroom. The first floor is a huge 3 bedroom not a 2 bedroom. The 2nd floor I didn't get to go inside and the 3rd is a 1 bedroom. The asking price is 179000. Taxes are 8000 including municipal garbage. 32 dollars a month for landlord electric. 20% down so mortgage will be around 700 a month and I figured 2500 for insurance. Water and sewer is 250 per quarter which seems low but the town clerk gave me the information. The current rents are 850 850 and 750. In this area a 3 bedroom brings 1300 a 2 bedroom should be 1000 and 800. Heat gas and electric is paid by tenantsThe numbers seem awesome and this would be a buy and hold I just don't know if it's to good to be true or if I am missing something. so I want to hear what you pros think. Thank you.

Sounds pretty good to me but I am far from a veteran at this.  I would also be interested to learn what some or the more seasoned investors have to say.

How did you find the property, was it MLS, driving for dollars, yellow letters? Is the property price the current going rate for the area or are you getting at a discount? If discounted, what is the sellers motivation?

I found it on the mls. The value is around 165000 according to zillow. I checked comps but have to research again. I believe it is being sold because the owner isn't making money. He dumped a lot of money into it and the rents are way under market rents. So I believe there is a possibility of lack of education on the landlords part. Or I am missing something and I'm hoping to get some help from here. I am going back Wednesday to look at it again.

I found it on the mls. The value is around 165000 according to zillow. I checked comps but have to research again. I believe it is being sold because the owner isn't making money. He dumped a lot of money into it and the rents are way under market rents. So I believe there is a possibility of lack of education on the landlords part. Or I am missing something and I'm hoping to get some help from here. I am going back Wednesday to look at it again.

I'm far from an expert... and this being your first deal I would think you would want to get very good advice from someone who knows better than I.

I would like to know where you got the mortgage figure though. It seems pretty low but I'm not really sure. I do know that when you get a loan the insurance will usually be wrapped up in the mortgage payment (PITI - Principal, Interest, Taxes and Insurance). So all of this needs to be taken into account.

It would be really nice if you could get the owners real expense info for the last several years. Of course you would need to weed out the updates as normal expenses, or just use the 50% rule... Figure your expenses will be about 50% of the rental income (Using a prorate for after increasing the rents to real market rents?). Then what's left over will be what you use to pay your mortgage. IF there is anything left after that it's income. If it's negative then that's what you are paying for your housing if you live in one unit. If you're not living in one unit and it's still negative then it's not that good of a deal.

I'm not an expert. I'm not even much of an investor with only 2 deals under my belt. The bulk of my knowledge comes strictly from book learning (internet/books/ebooks/forums/etc). Hopefully a "real" investor will come along and give you some "real" advice and shred mine to ribbons.

The bottom line is if you have real figures to work with, You know for a fact you can increase rents, You know the income will cover the expenses and mortgage with money left over then it just might be a good deal!

If you do happen to buy it and plan on living in one of the units... I would advise, from reading so many posts on the matter, DO NOT let the other tenants know you are the owner! Start an LLC. Put the ownership of the property into said LLC. Get a PO Box to have rent checks sent to in the name of the LLC. If you need help consult an attorney or someone who has more knowledge on this matter. I strictly state what I would do myself with the limited knowledge I possess.

Good luck!
RL

Robert - on first glance, these numbers look good. As with other posters here, though, I am far from an experienced investor (yet). You really want to do your due diligence on this, but it sounds like it could be a good deal. 

If this is your first deal, are you considering moving into it? Using FHA finance would mean less money down (3.5%) - the cash flow would be reduced, but having it be a personal property would mean you are both gaining the experience - in running your numbers, managing your expenses, and landlording - as well as reducing your cost of living down to close to zero or below.