Hello fellow investors! We have a triplex under contract with seller financing. Our monthly payment will be $600. The property has a 1 3 bedroom apartment, 1 2 Bedroom apartment, and an efficiency apartment. The 2 bedroom needs the smallest amount of work ($400) and would be rented first as its the easiest and cheapest to get finished and that unit would bring in $600. The other two units will require more extensive renovations. We aren't in the position to make the first $600 payment to take over the property at this moment but we don't want to lose the deal. Ideally we would purchase the property, make the repairs to the middle unit first, get it rented, and work on the other 2 units as we get more capital. What do you suggest???
Seems like this deal is a solid deal if you can get the other units rented! The one thing I will caution you with is this, if you are struggling to make the $600 payment, you might want to evaluate if you are really in a position to be investing. I am by no means trying to be negative, but the truth to real estate is that you will need *some* money especially if you are saying renovations will be required.
This does sound like a good deal. Do you know anyone who could potentially lend you some money for first month and repairs? If you can't pay the $600 right now and can't borrow money, this might not be the right time for you to purchase. I don't want to talk you out of it, but you will need some money as @Jacob A. said.
I will be very negative. If you do not have $600 for your first payment you are not prepared to be a investor. You are crazy to even consider going forward without a minimum 6 month reserve funds as well as all the cash to do the renovations on all units up front.
My guess is if you go forward you will lose the property within those first 6 months due to lack of financial forethought.
If you already have a seller finance deal then I would I assume the seller is willing to work with you. I would ask to delay the first payment and just have the next few payments be higher say.... $700-$800. Good Luck! Keep us updated, would love to know how it turns out.
Some solid advice here @Jalil Carter . Kind of scary that the property is completely vacant but do you have someone you can partner with on the deal? Happy to help you run the #s if desired.
Everyone has their own level of risk tolerance. But there is no way in h*** I would buy a rental property if I didn’t have $600 in my bank account. It’s hard to be patient, especially when you are hungry for success. Most of us here have been there. Get your financial house in order. There will be other deals. I can’t stand how these gurus make millions convincing people there is some magic ticket into REI.
Yeah I think this is a bad idea if you don’t have some cash to go into it with. Not having $600 for the first month knowing that there are renovations needed (some major as you said). Also, what about your reserves for tenant issues (water heater blows up, A/c quits working, etc)? Unless you bring in a partner this is dangerous :/
I agree with the last few post that if you don't even have $600 to make the first payment then there is far too much risk in this venture. I spent 15 years as a registered Investment Adviser and trader and we always preached maintaining AT least 3-6 months emergency funds (monthly expenses COMBINED) at all times. Now, allot of folks didn't follow our advice and I witnessed financial disasters with more than one of my clients and felt if they had only forgone the BMW lease and saved that $700 a month they wouldn't be in the situation. It may seem like an insurmountable number but with the right plan and lots of discipline it most certainly can be achieved. Look at this as a money management lesson that will be dividends once/when you do start making good bank, that hopefully your period of frugality will drive your money decisions going forward. Good Luck Jalil- but I don't think its the right time to make the plunge!
I suggest patience. It will be a good skill for real estate as well. You could bank up until you have more capital and let this deal go. Trust me there will be more deals in the future. It's also possible for this deal to be there by the time you save up more cash. I know the feeling of wanting to close on a successful looking deal. You will find out that more deals will present themselves while you are building your cash reserves.
Good Luck Jalil !!
Thank you guys. We decided to walk away from the deal. I agree that there will be more deals. We’re currently focusing on building our reserves with our real estate sales, rehabs, and daycare. I appreciate all of your advice. Thank you so much for taking the time to help.
If you can't make the $600 payment, you've got more pressing issues to sort out in your life than how to do a deal...Assign the contract to someone. Use the money to help clean up your act.
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