What else should I find out before seeing a rental?

Question

Hi,

I'm looking at a deal for my first rental property. As much as I've tried to research and be prepared, I'm worried there's something I'm going to miss or forget to ask.

So far: 4 unit and SF sold together because of divorce. Asking $99,500 for both. Looked them up on findcompsnow and it shows $188K, but I am aware these can be off, I've heard as much as 40%. Not sure how to get market value as I know no realtors in the area.

Currently fully rented: ~2400/mo, 1900-2000 after water, taxes, insurance. 4 unit was remodeled when they bought it in 2012, new roof in 2008. Shared laundry in basement. SF has new water heater, sump pump, not sure about roof. Would ask if there are any current repairs needed.

He mentioned currently zoned for multi-family, should I ask for proof of this?

Will provide leases, all receipts since owner purchased, water and gas usage.

This sounds promising, I think I'd like to take a look at it. I'm going to call in the morning. Anything else I should find out before hand, or while I'm on site, or ask for documentation on?

What specific documentation are hard lenders looking for? Should I ask before I see the property if the owner is ok with an inspection and appraisal if it goes to contract, before I go look at it? (It's an out of town property)

Shiloe B. · Answer

The monthly income to asking price looks good, so the next step is to calculate any major repairs required. You can do this by having a thorough home inspector come out after getting into contract, or if you are comfortable, set up a walk-through with some experts on your own.

I like to check:

Roof
Termites
Sewer lateral
Foundation
Plumbing (copper or galvanized)
Knob and tube wiring

Good luck, and keep us posted!

I like to check:

• Roof
• Termites
• Sewer lateral
• Foundation
• Plumbing (copper or galvanized)
• Knob and tube wiring

Good luck, and keep us posted!

Amy Van Ollefen · Answer

Bill, I agree, and I thought this was def going to be snatched already, but he had it under contract and it fell through because the guy couldn't get financing. I've got an appointment to go look at it, and now to try and lock down my own financing!  Holy smokes!!

Amy Van Ollefen · Answer

Yes he gave numbers for property taxes, water and insurance which were approx 4-500/mo. I plugged all the numbers into a spreadsheet I got on here and after piti, maintenance etc it cashflows at 500/mo using pretty conservative #s including about 14% for management and 15% maintenance/repairs.

Bill S. · Answer

My rule is if I am interested now I look at it now. You can write all the rest of the stuff (zoning, loan contingency, etc, etc.) in your offer. If you look now and write it this evening and send it to them this evening you could request a decision by noon tomorrow. You will have it under contract before your competition gets out of bed. Seriously you don't get good deals by waiting until the next day.

I don't know your area so I can't know if it's a good deal. If that property was on the market here someone (probably more than one) would have a check along with the contract on the desk of the agent by 5 pm. It would probably be there with 4 or 5 other offers (all cash) and most of them for more than asking price. I could put it under contract for $200K and resell it for $25K profit in 3 days time. That property would sell for in excess of $250,000 here via the MLS and probably more like $500K depending on the exact location.

BP can't tell you if it's a good deal or not for your area unless they know your area. All real estate is local.

Jim Sokoloff · Answer

I think she's saying that TI, water, etc is $400-$500, leaving $1900-2000 before principal, interest and other expenses.

Agreed that best case $2400 income and $2000 in fixed expenses would be an outrageous non-starter. That doesn't seem the case here.

Scott Nipp · Answer

Just curious here...  I'm not sure I understand the numbers that you have posted.

It sounds like you have 5 doors and when all 5 are rented you are taking in ~$2400/mo?  Is that right?  Your outlay is ~$2000 for PITI, water, etc.?  This is leaving you a net cashflow of ~$400/month on 5 doors?  That's only $80 per door.  This sounds like a horrible deal to me.

I'm guessing that I'm missing something here.

What else should I find out before seeing a rental?

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