First property - Noob needs help!

[Will T.]

Hi all!

Myself and my good friend want to get into REI. We are currently looking at a 4plex property that has an asking price of $360,000 that is situated in a nice area. It brings in $3560/mo with 2 units being month to month and 2 units rented long term. The units are all duplicates but 2 of the units have a small backyard. The rent varies per unit from $790 to $975. We plan to immediately stabilize the rents to bring in at least $900 from each unit. The property has been on the MLS for 45 days now with no offers; kind of alarming, but we've elected to go view the property on Monday. Through the BP Rental Property Calculator, we came up with a potential ROI of 15% if we self-manage & pay full asking price..which we do not plan on doing.

Here are some questions I would absolutely appreciate answers to:

• How should we acquire first time home buyer joint financing? (We do not have the ability to put down 20% on this property.. we only have $50,000 cash available)
• We asked if Land Contract would be available, if they say yes.. is this a smart way to finance? 
• Should we create an LLC so that legally we can own the property jointly?
• Are my estimated operating expense numbers logical? (see below)
  

[Daniel Kurkowski]

Not a RE attorney but...

Buying the property on a land contract or CFD is definitely a viable option, but typically expect to pay a little more. For me to be willing to sell something in that fashion I typically require a 10% down payment and charge 7.5%-8% interest on the remaining principal with a 2-3 year term.

You don't need an LLC to own the property jointly with someone else, you can simply take title as joint tenants and put some sort of operating agreement together. Owning it in an LLC on a land contract may limit you to needing a commercial loan to buyout the balloon payment, unless you transfer it back to yourselves personally to get the refinance done.

I typically budget $500 per unit in repairs assuming that the property will have no deferred maintenance and looks good to attract the right tenants.

If you are buying it on a land contract you wouldn't have any PMI, so that is an expense you can take out.

Otherwise the play may be to owner occupy one of the units.