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Updated about 3 years ago on . Most recent reply
Starting out with a 3 Unit.
I am currently working on an off market deal for my very first real estate investment property. The property is a 3 unit located at a very good area in a somewhat popular city. The ask price is $550k with annual rental income of $42k or $3500/mo which is currently under rented. I believe rents could be brought up to $4200-$4500 max. Property tax here is very high at 2.25% or roughly $12.5k/yr. I will be owner occupying so I was already expecting to be cash flow negative however after running some numbers, I think I will actually still be cash flow negative even after moving out and renting all 3 units especially if I include all of the expenses (vacancy fund,maintenance,utilities). It has been a long time dream of mine to get started in real estate investing and I really want to make this deal work but I don't know if it will end up putting me in a bad position for the future? Turn-key 3-4 unit properties that are cash flow positive in low crime rate areas are rare here. All properties around the area are ~100 yrs old however I believe the electrical and plumbing systems have been updated and should soon receive confirmation. The only update I think that would add value is to redo the driveway but it is not necessarily a must. Being as hard as it is to get into the market nowadays, do I bite the bullet or no deal?
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#5 Multi-Family and Apartment Investing Contributor
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- Shelton, WA
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#5 Multi-Family and Apartment Investing Contributor
- Investor
- Shelton, WA
@John Do I applaud your wanting to take action. A few thoughts. That property will not cash flow with those numbers.
Just because it is off market does not make it any better or worse. Since you are new hire an experienced buyer's agent to handle the deal and protect your end; pay this person yourself.
Make sure the property is inspected by a local inspector. Use estoppel certs to properly account for rent payment and deposits.
Be extra careful in overly tenant friendly areas.
Appreciation can be very lucrative but if it does not happen it will ruin you. Never be put in a position where you do not have access to capital and are forced to sell! All the best.