Fourplex Deal analysis

[Rocky Pe Benito]

Okay, BP team, here is a potential seller-carry deal in the works, and I’d like your thoughts of whether or not it makes sense. Please do not comment on the legal aspects of it since both parties are already working with their attorneys.

Property: Fourplex flat (two 3-bedroom 1-bath, and two 2-bedroom 1-bath with fireplace)

Condition: Average, no major repairs expected.

Location: Nice area; B-class neighborhood

Location: Multnomah County, Oregon (not within the City of Portland limit, so less stringent on rules and regs.)

Price: $600,000

Down payment: Negotiable but I’ll probably put $5,000.00, maybe less.

Terms: Seller financing using “Subject To” plus another note for the remaining balance.

Seller paid 25% down on a $556,000 purchase price a few years ago. So I’m guessing he started with $417,000 at 4.0% – 4.5% interest rate. I like the built-in equity here. I’m also assuming he signed a 30-year mortgage, so he’d have 27 years left on the note.

Additional details on my offer. He is willing to let me keep the mortgage contract long-term, so I can stretch it out to 27 years if I want to without demand for refinance later on. In addition, I asked for a 15-year note with zero interest rate on the remaining balance, I'm confident he'll say "Yes." My second mortgage would be $183,000 (did not factor in downpayment)

So, the numbers look like this:

"Subject To" mortgage (PITI): $2,750.00/month

Second mortgage: $1,017.00/month

Grand total: $3,767.00/month

Rents in the area: $1,300 for the 3 bedrooms and $1,200 for the 2 bedrooms.

These numbers are actually on the low end and I’m confident I can get $50.00 more for each unit. My confidence level is based on the fact that I have a fourplex just a couple of miles down the road.

But let’s stick with the 5k rents for now. That would leave me $1,233.00 net minus $225.00 for garbage and water/sewer. The $225.00 is accurate. Tenants pay for their electricity. After those expenses, my cashflow is about $1,008/month.

I think the seller is no longer interested in managing the property and appear to be motivated.

So, the big question is, would you take the deal and why? I’m also thinking long-term here. After I pay off that second note with the flexibility of paying it off early gives me great cash flow afterward. Also, I'm having difficulty getting any type of bank loan.

I look forward to your thoughts! Thank you in advance!