Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
Hello and thanks for your help
i am looking at 2 due plex in Georgia they are selling for 59K for both not each 59K total i am going to put down 8K owner if holding the loan at 8.5% for 8 years i have called a property management and they say i should be able to rent the 2 bd 1 bth for 400 a month(they are all 2bd 1 bath total of 4) that would be 1600 a month 2 are already rented at 400 and 300 this one seller is going to move up at end of lease i am thinking these are the numbers
rent 1600 minus
160 management minus
68 ins minud
700 mortgage payment minus
71 second loan on the home minus
100 taxes minus
100 maintinance and repairs
that should leave 401 for me is this a deal what else should i do before moving forward i am in California
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
16y
You want to know everything management is going to charge rather than just the 10% fee. Many PM's charge for advertising as well as lease ups which can run anywhere from 1/2 of first month's rent to all of the first month's rent. Are there renewal fees also? Those costs will greatly change your assumptions because when averaged out they can be right around 20% of the gross. Management will make or break your success on a property.
Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
16y
Rob, there are other costs such as vacancy, repairs, etc. It is best for you to assume that 50% of gross scheduled rent will go towards expenses.
GSI = $1600 / month
NOI = $800 / month
If you buy it based on the terms you have mentioned, your mortgage payment works out to around $450 per month. I am assuming the loan is amortized over 30 years and is fixed rate and repaybale after 8 years.
That gives you a net monthly cash flow of $350 per month, which is a little under $100 per door. (That's another rule of thumb that some investors use.)
Your total investment in this will be $8,000 and the annual return in the first year is around 50%, which is very good.
Before you pull the trigger, though, you may wish to account for your closing costs, whether your data for rents in that area is correct, whether you can find property managers who will be motivated to handle such a small number of units, etc.
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
Vikram
thanks for your help this is going to be a very simple deal it is 59900 minus 8000 leaves 51900 to be paid off in 8 years plus the whole seller wants 5000 and he is willing to take payments for 5 yrs what else is there to do i am buying this from a whole seller how do i know if the title is clear how do i protect myself moving forward what else needs to be checked i have always bought threw a bank and never did much other than signed lots of papers Thanks again for your help Rob
Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
16y
Rob, the numbers might then look different. The seller who wants the $59,900 paid off in 8 years at 8.5%, is he expecting you to make equal monthly payments like a morgage or is he expecting you to just pay interest and then pay the principal back in 8 years? Is there a prepayment penalty if you pay it off earlier?
I did not know there was a wholesaler in addition to the seller. Does this guy simply want $5,000 split into 60 payments or does he also want to get that 8.5% interest?
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
16y
You want to know everything management is going to charge rather than just the 10% fee. Many PM's charge for advertising as well as lease ups which can run anywhere from 1/2 of first month's rent to all of the first month's rent. Are there renewal fees also? Those costs will greatly change your assumptions because when averaged out they can be right around 20% of the gross. Management will make or break your success on a property.
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
it is 51900 loan with payments of 700 a month for 8 years the whole seller i am paying 71 a month for 60 months this is 5000 even no interest there is no prepayment
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
What about checking the title Appraisals and home inspections do i just call off the online phone book what else should i do to make sure years down the road when or if i go to sell it with conventional financing i don't run into problems
Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
16y
Originally posted by Brian Levredge:
You want to know everything management is going to charge rather than just the 10% fee. Many PM's charge for advertising as well as lease ups which can run anywhere from 1/2 of first month's rent to all of the first month's rent. Are there renewal fees also? Those costs will greatly change your assumptions because when averaged out they can be right around 20% of the gross. Management will make or break your success on a property.
All true Brian, but as in everything else, all is negotiable. If they really want your business, they may agree to wave some fees. Having said that, for the out of state investors, the PMs are in the driver's seat, so what they may give with one hand they can take with the other. :wink:
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
16y
Originally posted by Rob Smith:
What about checking the title Appraisals and home inspections do i just call off the online phone book what else should i do to make sure years down the road when or if i go to sell it with conventional financing i don't run into problems
You should absolutely get an Owner's Title policy. The cost won't be that much and for the piece of mind it is well worth it. If you have a Realtor working with you, they can meet the inspector. I would recommend going out there yourself as well (unless you've already been). Buying sight unseen is not the best way to go.
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
Hi Brian
what is Owner's Title policy i live in California and i probably cant get out to Georgia what else do you think i could do rather than go out there i have called 3 referrals the guy gave me 2 in Georgia and 1 in California i meet him on BP every buddy has good stuff to say about him i guess i could put his name and you guys could see it and let me know if there is any bad news on him It is Douglas Christian out of Charlotte, North Carolina Thanks for all your Guys input
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
16y
Rob, the deal sounds good. Douglas Christian seems quite solid. My concerns are your lack of experience, low cash reserves, combined with the long distance, and that you aren't going to GA to check it out for yourself. Consider the trip as an educational investment.
This may be a deal you should do, but if I were in your position I would go see for myself.
Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes
16y
Douglas is an upstanding guy. I've met him in person more than once.
However, I would be more concerned about your lack of experience and taking on a deal out of state. You'll be relying on someone else 100% to manage the property. For a newbie, that's quite a risk. My opinion is that you should try to land your first deal closer to where you live.
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
Originally posted by Jon Klaus:
Rob, the deal sounds good. Douglas Christian seems quite solid. My concerns are your lack of experience, low cash reserves, combined with the long distance, and that you aren't going to GA to check it out for yourself. Consider the trip as an educational investment.
This may be a deal you should do, but if I were in your position I would go see for myself.
I do have 9k in reserves and i do have 2 other properties that are long distance one in Tennessee and one in San Antonio TX they are ran buy PM is there going to be a problem getting duplexes managed by PM flying what would flying out do for me and if i do fly out what should i do when i am there
Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
16y
I completely disagree with Mark and Jon. Raise your Anntenas high and heavily use your common sense. If you do that, you'll be fine. Above all due diligence and Research! Research! Research!. When I started investing in Birmingham, I was quite a rookie. Of course, I made some mistakes but because I researched the place to death, my mistakes were not deadly.
I do agree that every trip you make (And so far I made nine to Birmingham since September last year) is education in progress.
Flipper/Rehabber · Indianapolis, IN · Member since 2009 · 128 posts · 35 votes
16y
You already have out of state investments so you know what you are getting yourself into and are obviously comfortable with that. I live in San Diego and invest out of state where I can get tremendous cash flow. I say go for it. Real estate can be passive and you are hiring property management so you do not have to deal with the daily hassles.
The numbers seem to make sense and you have accounted for management, repairs and other expenses. I would factor in vacancy but it is good that you have some reserves. My advice is to just make sure you do thorough due diligence on the condition of the property, due diligence on the management company and vacancy rates in the area and with similar properties. Make sure you are prepared for all worst case scenarios.
How is the LTV? I recommend to stick around 50% LTV and never go over 70%. That way you can unload it quick if you have to or hold, basically you have many exits. Rents I like when they are 2-3% of purchase and yours is 2.67%. Could be a fantastic deal.
One thing to consider is there are 4 units so there is a chance more than 1 unit can be vacant. Those numbers would be better with less units and less potential for vacancy. Do your homework as it appears you are.
It blows me away how many investors ask for advice on a deal that has terrible numbers. It is nice to see a solid cash flow deal and good for you for asking advice, it never hurts and actually allows you to mitigate risk. Best of luck, I would love to hear how it turns out.
No pre-payment penalty on the loan I assume? Any chance you can up the rents?
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
16y
Originally posted by Eddie Ziv:
Originally posted by Jon Klaus:
"I completely disagree with Mark and Jon."
What, you think Douglas is taking him for a ride? :lol:
Sorry, maybe I should have been more precise. I don't even know Douglas. I was refereeing to the comment regarding a newbie investing out of State.
Rob made me nervous when he asked what a title policy is. Then after I posted, he said he had other out of state properties. He's not as green as his first couple posts led me to think.
Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes
16y
Originally posted by Jon Klaus:
Originally posted by Eddie Ziv:
Originally posted by Jon Klaus:
"I completely disagree with Mark and Jon."
What, you think Douglas is taking him for a ride? :lol:
Sorry, maybe I should have been more precise. I don't even know Douglas. I was refereeing to the comment regarding a newbie investing out of State.
Rob made me nervous when he asked what a title policy is. Then after I posted, he said he had other out of state properties. He's not as green as his first couple posts led me to think.
Exactly. x2. If you look back, my comments were made before he said he had other out of state properties.
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
Originally posted by Ryan Moeller:
You already have out of state investments so you know what you are getting yourself into and are obviously comfortable with that.
I do have other out of state investments but those were all handled with a bank the bank and the Realtor did all the behind the science stuff and all i did was sign papers this is my 1st deal where i am dealing with a whole seller
My advice is to just make sure you do thorough due diligence on the condition of the property, due diligence on the management company and vacancy rates in the area and with similar properties. Make sure you are prepared for all worst case scenarios.
this is were i need help Property condition,check PM, Vacancy rates in the area how do you do this research
How is the LTV? I recommend to stick around 50% LTV and never go over 70%. That way you can unload it quick if you have to or hold, basically you have many exits. Rents I like when they are 2-3% of purchase and yours is 2.67%. Could be a fantastic deal.
i need to find out my value to know my LTV what is the best way to do this
No pre-payment penalty on the loan I assume? Any chance you can up the rents?
there are no pre pay penalty and the one that is rented for 300 Duge thinks we can get 400 to 450
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
guess i did that quote wrong i need to learn how to do that i asked my questions with in the quote sorry hope you got that and thank you for all the great help what does a vote do for you i am putting a vote in on all that are helping me hope that is a good thing thanks
Investor · Chino Hills, CA · Member since 2009 · 95 posts · 12 votes
16y
Originally posted by Jon Klaus:
Originally posted by Eddie Ziv:
Originally posted by Jon Klaus:
"I completely disagree with Mark and Jon."
What, you think Douglas is taking him for a ride? :lol:
Sorry, maybe I should have been more precise. I don't even know Douglas. I was refereeing to the comment regarding a newbie investing out of State.
Rob made me nervous when he asked what a title policy is. Then after I posted, he said he had other out of state properties. He's not as green as his first couple posts led me to think.
i am green first property i bought i lived in and when i moved my wife and i kept it second house was bought with an investor group out of TX and i just remember signing papers and then the deal was done third property was also bought with and investment company in Tennessee and i just finished that one about a wk ago they did all the work and title junk i don't even know what they did this is my fourth one and it is my responsibility to do all the checking and i don't know what to check so you guys are really helping thank you so i am pretty GREEN i have lots to learn
Real Estate Investor · Mountain View, CA · Member since 2009 · 49 posts · 16 votes
16y
The title policy guarantees that you own it.
Without such a policy it is possible the guy selling it to you does not own it, or perhaps the guy he bought it from didn't really own it. If either ends up being true you won't own the property, and you don't get your money back either.