Advice on a potential purchase?

4 Replies

Hello, everyone!

First time poster here. I've been researching REI for about a year now, and I have an opportunity that I'd very much appreciate some input on. The short story: my mother's landlord will be moving out of the area and no longer wants to own the home. Some points:

- The landlord is asking for $300,000. I would put up the 20% down. A basic mortgage expense calculator tells me that I'll have monthly payments around $1,400 per month including taxes and insurance. 

- The property is an old carriage house and has four (4) rental units. These units are all in great condition and rent for $3,400 total ($750, $750, $750, $1,150). 

- I'd consider this to be a B+ neighborhood. My mother has been there for around five (5) years now, and there's almost no tenant turnover. When there has been, no space has been vacant for more than a month.

I know there's certainly a ton of information that I haven't given that would make any responses infinitely more useful, but I would love to hear some first thoughts if anyone is open.

Thank you all, and happy new year!

Doesn't sound too bad strictly from your financials.

I don't know your market there but hey, I guess the key question is would this type of profile work for you with where you are in your life?

Here's some questions I'd want answered before moving forward -

  • Why is the current landlord getting out?  Sometimes there's a real reason/another part of the story.  Time vs payoff not worth it?  Moving?  I'd want this story to check out.
  • Do you have experience being a landlord?  Is this something that may appeal to you?
Originally posted by @Jim Goebel :

Doesn't sound too bad strictly from your financials.

I don't know your market there but hey, I guess the key question is would this type of profile work for you with where you are in your life?

Here's some questions I'd want answered before moving forward -

  • Why is the current landlord getting out?  Sometimes there's a real reason/another part of the story.  Time vs payoff not worth it?  Moving?  I'd want this story to check out.
  • Do you have experience being a landlord?  Is this something that may appeal to you?

Jim! Thanks for the response. And the questions are great, too. I'll answer those quickly:

- The landlord is an old college professor, and she's been discussing wanting to sell the property for over a year now. She's holding firm at the $300K, and I believe she's had challenges finding buyers at that value. I feel confident that her reasons are genuine. Thank you for the note, though!

- The question on whether or not I've experience being a landlord, the answer is simply "no." I think it may appeal in the future, but as I'm going to living in Los Angeles for another couple of years and this property is in Upstate NY, I don't know that it would be feasible for me to manage the property entirely on my own in the short term. This is a big part of where my research still needs to happen. 

Thanks again! 'Tis much appreciated.

@gregory

Be careful of the taxes in Greenwich, I would definitely get the assessment redone or make sure it’s current. Taxes that way are a killer.

@Gregory Almy make sure you get information on additional expenses including annual utility costs (heat, electric, hot water, water, sewer) and if the landlord is paying them or not.  $40K/yr is great for income, but if you're shelling out $5K/yr in heat and $5K/yr in electric costs (which breaks down to $105/unit/mo), you've just eaten up almost all of your profitability or you might be cashflow negative.

Additionally, look into the costs for snow removal, lawn maintenance, trash removal, insurance, and what the annual taxes are for the property.  It is a four unit building which comes with the plus side of being able to use a residential loan (longer term, lower rates), but make sure you're not overpaying based on other 4 units in the area.

Lastly, I'd make sure the building is professionally inspected so you know if there's any deferred maintenance or any large capital expenditures that are looming on the horizon.  

Best of luck!  

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