All Forum Posts by: Sam W.

Sergio B.

I'm not a lawyer or RE pro, but a septic system is a not deficiency so it probably does not have to be disclosed - especially since it is the standard for the area.

Not sure you have any footing to reopen negotiations.

I would have the system inspected once you close just to see what's-what and head off any potential problems.

Sergio B.

When you say "waiting to hear from the bank", what do you mean?

A couple of questions:

- Did you offer / accept an "as-is" purchase?

- Was there an inspection period? Did you have one done? If so, did the inspector discover there was a septic system (Is there also a well?)

- Was your offer "subject to" a satisfactory inspection (or some such wording)? If so, has the period passed?

- Did the appliances belong to the previous residents? I'm not an expert but when the bank forecloses I think the terms of forclosure only applies to "permanent fixtures"...not sure appliances are included (so might not be included in the sale because they aren't the bank's to sell).

In my experience, converted duplexes should not sell for 2x the price of a single family house. In fact, in my area average SFHs sell for about $80-100 sq / ft. while a converted duplex sells for between $30-$50 sq/ft. Duplexes/Twin-plexes that started life as a multi-family sell for a bit more.

Based on what you've written, I'd estimate the seller is asking about 40% too much.

As an aside, from personal experience, a big lot (3/4 acre in this case) is not a good thing when dealing with multi-family homes.

I'm not an economist, but generally with inflation, an increase in the money supply (dollar is worth less so you need more of them) will cause the price of a commodity (real estate in this case) to rise as inflation increases. If you own the commodity now it will generally be worth more later.

This is overly simplistic but basically, it is better to buy the commodity before inflation hits because it will become more expensive later.

So, in answer to your question, I am not worried about inflation's impact on my rental properties (because their value (and the value of the rents) will increase.

Shawn M.,

Why haven't you made on offer on the house yet?

Jason Burton

The 50% rule covers Taxes and Insurance, so in your case the $800/month you have available every month only has to cover PI - so this deal actually looks even better.

(You would only add an additional % for taxes / insurance if they were abnormally high.)

You didn't mention utilities....do the tenants pay all their own? If not, you'd subtract your share from the $800.

Great advice by Mark Updegraff - particularly on getting one unit rent-ready at a time. Most insurance companies will allow you to switch coverage from vacant to occupied when you get 1 unit rented......this is a big reduction in your premium so it pays to get the first unit rented as soon as you can.

Also as Mark said, make sure of the rehab costs. If it pans out the way you layed it out, sounds like a solid investment.

Brandon,

Why not just use the $15K in your share account to pay for the repairs and pay yourself back when you refinance? Same effect and you save yourself the 6 months worth of interest charges.

So the bank uses your money in a share account (drawing .75%) to secure a loan they make to you for 5%? And my share account is tied up anyway as collateral (can't withdraw a dollar until I pay back a dollar).

Hmmm....

Paul Nagy

Big duplex (1800 sq ft. per side)

Given what you said are you absolute maximums, the numbers look like:

PI=$363 (based on $97K purchase)

Expenses with no PM (40%): $580
Expenses with PM (50%): $725

Cashflow with no PM: 1450 - 580 - 363 = $507/month ($6084/year)

Cashflow with PM: 1450 - 725 - 363 = 362/month ($4344/year)

You didn't mention utilities so will assume tenants pay all.

Your cash outlay: 20% down + repairs + closing
Your cash outlay: 19,400 + 16,000 + 1455 (est) = $36,855

CoC return: No PM: 6084/36,855 = 16.5%
CoC return w/ PM: 4344/36,855 = 11.7%

Seems like a decent deal (not a great deal) with either course of action.

Good solid deal Mehran Kamari. Congratulations.