DEAL OR NO DEAL??

Question

I'm looking to start investing by living in a duplex and renting the other part out. This duplex is located in Tampa and the owner is willing to owner finance. The terms she offered me are:

Down payment- 15k

Loan amt- 100k

Interest rate- 5% for 10 yrs.

I will owner occupy the 1/1 but it's currently renting for 550 and the 2/1 is currently renting for 850 bringing in 1400 per month. The taxes are 923.14 and there are separate meters for utilities paid by the tenants.

This will be my first deal and I am trying to limit as many mistakes as possible. Please give me your advice and remember I will be taking over the 1/1 after the purchase.

Colleen F. · Answer

Look at sold properties online.  Depends on your area how you find these this will tell you what the property is worth. Sometimes they put it in the paper, sometimes you can get it from a real estate listing database, instead of choosing for sale pick recently sold.

Negotiate a little. Would you qualify at a bank for a loan?, I think your interest would likely be less but I could be wrong. Would there be a pre-payment penalty if you financed elsewhere at some point and paid her off?  In any case have a sales contract legally drawn up if you do this. Also find out the lease duration for the tenant you plan to have leave- if you intend to owner occupy.

Account Closed · Answer

@Aryelle Collins

I love Zillow and Redfin! I use those apps every day!  They can help you learn property values. I spend a lot of time looking at properties that are for sale and properties that have sold. I'm looking for a duplex in Georgia. I've seen fixer-uppers and turn keys on there. It has taught me a lot about property values.

People can list a property for sale for any price they want. It's the SOLD prices that I pay more attention to when using Zillow or Redfin. I see some multi-families sit for sale for a long time. I assume they are priced too high or they need a lot of repairs.

Also, you can set up Redfin to email you when multi-families are for sale, pending, or sold in different areas that you choose. It can help you learn your target area without having to search the apps or websites everyday.

Kevin Harrison · Answer

This doesn't seem like a terrible deal, you wont make anything on it with the financing she is offering you but if wont cost you much to live there either. I would do it and live there for 3-5 years (or whatever suites you) then refinance the home when I was ready to move. That would allow you to pull your equity/appreciation out and lower your monthly payment so that this place cash flows nicely. At that point you could decide on either a 15 or 30 year term, or if rents have gone up you can keep the 10 year owner financing and just pay the place off sooner.

Jay J. · Answer

eh, the easiest way would be to maybe contact a realtor and find out what comps in the area are..  you could check zillow or realtor.com for a ball-park estimate of value..

..as for the $1060/mo. If you're renting out the 2/1 and your staying in the 1/1, your payment should only be about $200/mo..  Plus, you need to include insurance, vacancy, etc..  If you rented the other 1/2 for $550, you'd probably break even on it..  again, depending on the specific financials.

Aryelle Collins · Answer

@Jay J how can I find out how much it is worth now and with some minor fixes?

Aryelle Collins · Answer

@Jay J. The property is in pretty good condition and she only want 1060$ per month and I want to keep it as a rental property

Jay J. · Answer

What is the condition of the property?  Is it worth more than $115k?? What is the monthly payment she wants?  (100k @ 5% over 10 yrs is about $1,100/mo -> http://www.mortgagecalculator.org/)

..what are your plans for the property?  Sell it off ? rental ??

DEAL OR NO DEAL??

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