All Forum Posts by: Sam W.

Have an idea and would appreciate everyone's thought.

There is a vacant 3-plex next to a 4-unit that I own. It has been vacant for about 2 years though the owner maintains it and is current on all taxes.

About six months ago I approached the owner about selling the property to me. He relayed to me that he had inherited the property and, though he really did not want to be a landlord, he did not want to sell the property either. So, it continues to sit empty.

I've toyed with the idea of approaching the owner with an offer to enter into a long-term (10 year) lease with him with the provision that I would be able to sub-let the 3 units. He would be responsible for taxes while I would be responsible for the maintenance, repairs (up to a certain limit [$2500?]), etc. The lease would have to contain a no-sale clause to protect me.

Thought and possible pitfalls?

Steven,

I'm a relative newbie as well (began REI about 4 years ago). I own a mix of single family homes as well as duplexes and 1 four-unit. I'll close on a 3-unit next week.

Based on the info you gave and assumptions I made (the 8-plex is 600K and 10% cap and the 7-plex is 500K and 9%), you'd need to average $1250/month/unit for the 8-plex and $1071/month/unit for the 7-plex. I'm not sure what the rental market is like in your areas, but that's rough back-of-the envelope math the is useful to assess whether you'll be able to turn 10% and 9% cap.

Your best bet to meet your no cash no credit goal would be the 8 plex from the private owner. The bank-owned 7-unit will be tough to do with the parameters you have set. I would work to see if the private sellers would carry the note with very little/no down.

Good luck.

I have a 4-plex in the Akron, OH area and have a traditional property insurance policy. I think it will depend on the particular insurance company. Though I'm not in the DFW area, I am satisfied with Foremost Ins.

In my mind, in almost all instances I prefer financing versus cash. As Joel said, cash is king. You can stretch that $45K that you would pay in cash for one property into perhaps two or three if you finance. You will still be able to get a HELOC (although much smaller and after the 6 month wait period).

The one challenge is, depending on where you are, it is sometimes tough to finance smaller mortgages (less than 50K), but working with local bankers is the key to overcoming this (it sounds like you have a banker that will work with you).