Updated almost 16 years ago on . Most recent reply
What's the right purchase price?
Hey everyone, please help me with this deal. It's a 3 story duplex with 4 rental units. All units have separate electrical and gas meters. 1st floor - 1 bedroom
2nd floor - 2, 1-bedrooms (can be turned into a 3 bedroom w/2 bath)
3d floor - 2-bedroom.
It's a bank foreclosure that's on the market for $349K. They recently lowered the price to $319. I checked the public records and the previous owner owes $519K in loans! My potential gross rents can be ~$3700 per month (includes vacancies). The property is in bad shape and will require ~50K in renovations.
I'm thinking of $230K as my offer price. Here are my calcs.
Purchase price - $230,000
Renovations - $50K
down - 20% - 46K
Closing costs - ~15K
Loan amount - $184K
Monthly debt - $1225 monthly
RE + Ins - $300 monthly
Total out of pocket - $111,000 (pretty high)
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gross income - $44000
operating expenses - 50% - $22000
Debt - $18300
Net Income - $3700 yearly / 12 = $308 or $102 per unit
What would be the right purchase price?
Does it make sense to turn two 1 bedrooms into a 2 or 3 bedroom?
Does the 50% rule include RE taxes and Insurance?
How does the $50K in rehab money fit in the 50% rule or should I account for it separately? If i'm investing 50K in renovations am I still at 50% operating expense?
Thank you all,
Paul.