Deal Analysis

[Christopher Dumelle]

I am looking at a 4-Unit home in Sterling, IL, it is zoned as a multi unit. The asking price is 84,900. I have looked on the MLS and various other sites zillow, trulia, ect... there are not really any comparable sales. There are a couple other multi units for sale at 79,900 and a duplex around 49,900. I have seen the outside of the property and am setting up to see the inside this coming weekend. I believe the the property might be over priced. The numbers I have run though it still produces cash flow.

Also the owner is willing to owner finance, and not require 20%+ down like I would need through a bank. it is also currently all rented out.

I have not began discussions with him so I do not know an exact interest rate or purchase price. Ideally I would be able to get it for 80,000 at 6% or less.

He has a mortgage on the property also. He purchased it 4 years ago so I am making an assumption on the interest rate. He purchased it for 93,000 when he bought it, and it said he has done some repairs. The owner said he pays about $200 per month for water sewer and garbage, he said he had the yard trenched to separate the water but has not gotten around to it yet. The owner had moved about an hour and a half away from the property and this is why he wants to get rid of it. He also stated that he pays $150 for management fees. I would try managing the property myself at first but I also live about an hour away so i kept his management fee in the cost.

I would also prefer the property subject to his existing mortgage, is there a good way to bring that up. My thoughts are, he said he wanted 10% down, but if he has a mortgage on the property this would have to go towards the mortgage on the property would it not? If not he may owe more on the property than he is trying to finance it for. So if he would be willing to do it subject to his existing mortgage, I could essentially pay him $X to buy him out of his existing mortgage. Is that an option with subject to?

I will be bringing any documents I may sign to a lawyer before I sign them of course.

I will add more details when I actually see the property and start negotiating. I am just wondering what tips or pieces of advice anyone may have. Sorry about the length of the post.

Here are the numbers:

Gross rent: 1765

3Br: 575
2BR: 525
1BR: 350
Studio: 250
Garage: 65

Vacancy Rate: 12%: 212

Expenses (estimated monthly): 977

Lawn: $152
Insurance: 58
Management Fees:150
Repairs/Maintenance: 167
Taxes: 250
Utilities: 200

Mortgage 80,000 at 6% int.:479

1765
- 977
- 212
- 479
---------
$97, per month cash flow.