Searching and Found a Property, Now What?

Question

I'm just searching at this point. Not investing any money yet. So this is just a scenario I am looking into. I found a foreclosed three-unit multifamily house close to where I am living in Birmingham, AL. It is listed for $67,700 through a Realtor. I took some pictures to keep it fresh on my mind. It seemed like it was in pretty good condition (from the outside) not too many cosmetic issues at all. I did an Internet search to try to find a value of this property. It came up between $137,396 (low) and $185,888 (high).

Anyway, I am wanting to know and learn the steps from where to go from here. 
-Calculating expenses (I read an article about being able to calculate them on a napkin to estimate positive or negative cash flow), but I do not know where to find these numbers, including HOA costs, utilities and whatnot, mortgage, vacancies, etc. 
-Seeking out and acquiring funding to pay for the house 
-Finding tenants (no one currently living there) 
-Also, possibly finding a property management company to help (I want a hands-off approach) 
-Other steps/costs I have not thought of.

I would greatly appreciate any feedback to help point me in the right direction, or even be a "bird dog" for someone else to purchase this property. I just want to learn the process involved and what is necessary to actually purchase a property (as well as how to determine revenues and expenses). I enjoy reading about all of this information, but I would actually like to watch a deal from start to finish in-person to learn as well.
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I also found two identical 8-unit apartment complexes (they're right next to each other and for sale) going for $180,000 each. Both complexes are active with tenants already living in them to generate income. I am not sure how well they are being kept up or whether they need refurbishing; they were built in 1971.

If you wanted to purchase these properties, what would you do to make it happen?

I realized I really enjoy driving around and looking at properties. Given, there weren't any tenants, so I was able to walk around the property, peek inside, and take pictures.

This is a repost thanks to @David Gellner for pointing me to this forum.

Jon H. · Answer

Sorry i didn't want to have such a long post but i wanted to answer some of your questions. 
1st thing using a realtor is ok but you'll be able to find alot better deals through Wholesalers or by individually marketing to sellers who need to sale their houses. 
Lets look at costs:
- make sure you have enough money saved so you have a cushion.
Lets look at this scenario
Costs of a single family 3/1 rental house $11000
- Rehab, you need to study what things cost. Once you get a general idea of what materials cost you can make a round about estimate. I would find a contractor and before you bid on a house have him go out there with you and let him give you an estimate. This way you can use this as a reference in your future deals as well. 
- Property manager - I would call property managers and see if they will manage the property your thinking of purchasing. They can give you great information on what it will rent for and if thats even an area you want to be in.

Now when i look at a property heres what i do. 
1. if i find it online i call and see if the property is available and if i can bid on it.
2. check crsdata and see what the property is worth and what has sold in the area.
3. check zillow to see what is currently renting in the area and what the rental prices are.
4. I'll do a quick calculation to see if the property is going to be worth going to look at using estimates for rehab.
Calculation:
Rental rate
minus
taxes: this will be on crsdata 
Ins: I usually calculate $1000-1100 for the year
Misc: 10% of rental income
Property manager: 1/2 1st months rent plus 10% of the next 11 months usually comes out to 12%
Exp:
Rental income: $750
(property management: $100)
(Taxes estim $900/12: $75)
(Insurance: 1100/12: 91.66)This is variable it could be lower
(misc repairs in future: $75)
=  $408.34 per month profit or $4900 a year
This is a great profit if you get a house rent ready under $20K.
Thats a 24.5% Cap rate.

Jon H. · Answer

Hey Tyler,
I also live in the Birmingham area. Heres my suggestions on how to get started. 
1. Get a subscription to crsdata.com or realquest. it is an investors access to the MLS. I use Crsdata. You can pull the comps in the area and also generate mailing lists and a whole bunch of other stuff. This gives you an idea of what the property is worth. 
2. Get you finances in order. How are you going to fund your properties? Get prequalified with a conventional lender (must have 20% to put down) Or start going to local AIA meetings. You will meet several Private money lenders here. Or if you have Cash (which is King) thats your best option.
Actually lets back up. Before you get started really think about and study what type of investing you want to do. Do you want to fix and flip? Buy and hold as a rental? Wholesale? Fix and Flip to landlords? Etc. When looking at any property you need to figure out what your game plan is. What is your exit strategy. Sounds like you want to get some rental income. If i were you i would look at single family houses. You can pick up a rental in Birmingham for under 10K put 5k-10k into it and rent it for $750 a month. You can plan on taking home about $450-$500 of that.

Jon Holdman · Answer

Unless the triplex was just listed in that last few days, I'd say its value is, at the very most, $67,700.  There may be other comps that support a higher value, but something is reducing the value of this one.  Most likely, its condition.

A super quick and dirty way to estimate cash flow is to figure figure out your down payment and financing terms.  From this, compute your P&I payment (principle and interest, not the full PITI payment).  Now, estimate cash flow as:

cash flow = (rent * 50%) - P&I payment

Now multiple by 12 to get annual cash flow.  Now compute your cash on cash return as:

cash on cash return = annual cash flow / total cash invested

Do you like that number?

Now, if you're willing to self manage, you can earn another chunk of money from the rental.  That's probably at least 10% of the gross rents, perhaps more.  PM's typically charge 10% of the collected rents plus a half month to fill a vacancy.  If you do that work, you can earn that money.  But realize you area earning it.  Its coming from your labor, not from the property.  I see you want hands-off, so stick with the 50% number.

Funding usually comes from a bank.  Plan to put down 25% +/- if you're not living there.  If you are going to live in one of the units, some other types of financing with down payments as low as 3.5% are possible.  With a triplex, you can get "conventional financing".  That means fairly low rates (figure half to one point higher than rates you see advertised) and a 30 year fixed term.  Anything larger than four units is commercial financing.  Rates are about the same as an investor loan for a conventional loan, but terms will be shorter.  15 years, maybe 20.  You may also have to do a balloon loan.  That's one where the payment is computed as if you have a 15 or 20 year loan, but you have to pay it off fully after five years.  At that point you have to sell or refinance.

Champak Shah · Answer

Find a local Investor and Flip for $3000 Fee  -- Depends how close to University of hospital --if you can rent each unit for $500 per month --
do  the numbers --  I am surprised no one bought yet -- so cheap -
 check repairs estimates -- make it livable -- depending on the age --check  to meet building code requirements --  if  its already foreclosed --and no one bought --make offer for $50,000

Need  to have your Buyer's List first --OR move to Atlanta --plenty of buyers here.

Erik Kubec · Answer

I'd say you need a minimum of 3 months of research, a couple of hours a night / day.

You need to look at craigslist, your local MLS enabled real estate sites, zillow, trulia, city-data.   Also Realty Trac and more.

Find out how much properties cost and how much they are renting for.

Financing is an entirely different game.  Do you have good credit?  Do you have a down payment?

This will sound a bit paranoid, but don't trust any singular 'expert' be it a real estate agent or loan officer, or what not.  They get paid when you buy, whether or not that purchase makes you wealthy or makes you bankrupt.