There is a property I want to buy in el paso TX with zip code 79905. The property I'm considering buying is a triplex. Monthly income is: $650, $500, $400.
Tenants pay all utilities
Taxes are around $4000 a year for the entire property.
Monthly maintenance expense is $250
According to the public records the property has an assessed value of $145K. Each year the property appreciates in value around $11K
The seller is selling it at $117K with a LP/SQFT $40
When I was working with a realtor seller had decided that the only way to sell the property to a selling would be for a sale price of $99K and 20% DP and no inspection period. I didn't like the option of not having an inspection period I didn't go for it but I did like the price.
Days later I looked for more opportunities in a different website and found the same property. This time there was not realtor attached to the property so I would be dealing directly with the owner.
I called him yesterday and told him that I was interested in his property, he figured I was the same prospect buyer so I told him the truth.
Now he is presenting to me this alternative:
Owner financed for the first year only then I could refinance with my bank of choice.
Monthly payment to him with taxes $1200
Sale price is $107K
Right off the gate I think this option is a bad deal.
I was thinking I could offer him $100K with a conventional loan 20% downpayment financed through my bank.
(This is where I need help)
I also could negotiate something similar to his offer:
A lesser payment to him monthly (how much would be good payment)
A much lesser downpayment (how much downpayment could I offer him, the least amount the better, wouldn't we all like that)
Then after a year I could refinance the property with my bank.
Any feedback and advice is greatly appreciated.
Thank you guys.
I agree, in that his offer sounds like a bad deal for you. Great for him. I am not a fan of owner-finance. Why would you consider that? Are you not able to get a conventional loan, with 20-25% down? Being a straight investment, unless you'll be residing in a unit, you're looking at probably 25% down. I also would never buy it without an inspection. An inspection has saved us numerous times. If he's not allowing it, I'd say there is a reason and you need to walk away.
Bank or seller depends on getting the best deal you can. Get the numbers from a mortgage broker first then see what the seller will do better. If you don't need seller financing the only thing that matters is the numbers.
Also the expences on that property are wrong, way too low, Use the 50% rule going in till you get real numbers in due dilligance.
Here in El Paso, it's possible to finance $130k or more with 25% down and have payments of $1100 which include property tax and insurance. The seller financing you describe sounds too expensive.
Also, the 11k appreciation is much too high. This is a very slow appreciating market.
Unless this is an A+ market you are overpaying for the property. A few questions, what is the sqft, bed bath count of each unit? Given the rent price would say the location or building is dodgy. Try and locate a motivated seller, You'll surely get a much better deal. Always inspect, if they won't let you in and you are not getting a dirt cheap deal almost any major repair could ruin your investment.
Hope this helps, pm for any questions.
So the owner called me and said that he lets it go for 107K. I would be putting 20%DP and the rest through my bank. I told him that I would need to inspect the property and he said that it was okay.
These are the specs of the property:
Built in 1981
Flooring is tile
Construction: masonry and stucco
Lot size 8363
1 unit of 2 bedrooms 2 baths
2 units of 1 bedroom 2 baths
Square footage is $40
3000 square feet property
Neighborhood around hospitals and college.
2 of the tenants have been there for 5 years
1 of the tenants have been there for over a year.
Tenants pay all utilities
What would be the cap rate here.
I don't know the Cap rate average around the neighborhood or city?
What else should I need to do a more in depth analysis of this property?