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Updated almost 11 years ago,
4- Plex in the Midwest
I am new to BP and have been learning a ton in the last few weeks. I am 22 and have been wanting to get into real estate investing for quite some time.
I have the opportunity to buy my first investment property and its a 4-plex that is a one bedroom/ one bathroom units. Units are fully occupied at $410 a month which is on the lower side compared to other units in town. $425 seems to be the average.
Seller wants 117,500 its tax assessed at 109,000 similar units in the area seem to be selling for between 105000 and 135000. Its been for sale for 9 months and they started out at 125,000. It was built in 1952, roof is approx 15 years old, 3 older AC units, 2 older Hot Water heaters, 4 Gas furnaces appear to have 20+ years on them, electric is all up to date, appliances seem almost new.
Owner has owned the property for 11 years and wants to completely get out of real estate (its his only property). Owner used a PM company, however I would manage it myself, and I am very handy with repairs.
Realtor informs me he can get all necessary documentation on the financial side of things. He provided me with an expense sheet that breaks everything down with "real" numbers in his words. With PM expenses come out to be 47%.
Financials:
Expenses in a year
- $9339 this includes %12 for PM and 18% Maintenance and CAPEX.
Gross Operating Income less %5 vacancy (average around here) is
-$19479
Realtor told me that the seller would entertain offers from 105,000 He said "anything can happen".
This deal seems to be solid, I just wanted your options on the deal and the age of the big ticket items.
I believe I will keep this under my own name and get a very large insurance and umbrella policy.
The other question I have is, about lending. I have called every bank around, and the best offers I have gotten at 25% down for a 30yr fixed with a rate around 4.75%. That would be sold to Fannie Mae. Other is an in-house loan with a 5yr ARM over a 30 Amortization with a 2/6 cap rate. starting around 4.75% but would potentially only need 15% but 20% for sure down payment. 25% down would stretch me with reserves. Which sounds like a better option?