Looking to buy a fourplex.

[Mario Cantu]

I am in the process of trying to buy a fourplex property without a down payment through an owner finance agreement. I do not have anyone close that I can discussed this over with to get and outsider view point to put a value on this deal. I have recently met with the owner to present my proposal and have to come to this conclusion thus far.

I am offering a purchase price of $230,000 based on $82.2 per square foot for owner financing terms at 8% interest rate for 30 year term with no balloon due..

Break down:

$230,000 at
8%= $1687.66 principal and interest payment.

Taxes= $1314

Insurance=$2060 for $299,000 of coverage.

Total cost for monthly payment estimate for P&I, Taxes and Insurance=$1968.82

Rent roll:

APT. A =$650

APT. B =$650

APT. C =$650

APT. D =$750

Water Owner Paid=$100

Total rent
roll= $2600 with water deducted.

Monthly maintenance cost (rent roll x 10%) = $270.00, I do most maintenance anyway, but factor this as a general rule of thumb.

$2600-1968.82=$631.18- $270(Maintenance cost) = $362 cash flow.

The rents are below average and I believe have a lot of room to increase, but am only considering this at today's prices. The condition of property is good, with new updates in the last couple of years such as; roof, hot water heater, inside ac units in all four unit with two new outside ac condensers and new electrical panels with breakers. I am also going to try to negotiate a 7.5% for 25 year term to help improve my sweat equity. Please help with providing feedback. I personally think this is a no brainer considering no money down, but I could also be wrong. Thank you for reading.

[Christopher Dumelle]

I agree with Jon the numbers seem a little too close for comfort to me.

That said, this is only because I recently did a deal similar too this but I had 3400 dollars down. A much lower purchase price 74900 gross rents about 2000. Cash flow after all expenses including property management about 300 bucks a month.

At first glance of all the "rented" units they didn't seem too bad. Once I closed on the property only 1 unit had a tenet left in, and the tenet renting the garage was still there thankfully. The other 3 units upon further inspection needed quite a bit of work and updating, before I would feel comfortable putting my name on them.

Needless to say its been 3 months, and roughly 10000 in renovations and we are about to rent the 3 bedroom unit out ( the biggest unit of the 4-5 if you count the garage.). I say we, I had to bring my parents on as partners to keep the project moving.

That is the short version of the story. I posted my pre deal analysis on here and received much constructive criticism, saying the deal has potential but the numbers don't seem that great. Ill be completely honest I read and absorbed those comments, then completely ignored them. Not my best decision in hindsight, but in my mind I "needed" to get into real estate right then.

In the end it's still going to work out to be a good cash flowing property. It is just taking much more time money and headache to get there.

I have read many many posts and listened to tons of podcasts and books, but it's never quite the same until its real. So all this said this it has completely changed my pre purchase analysis, thought process about investing, and will ultimately make me a much better investor in the long run. Since this deal I have come across a couple others I ended up passing on from what I've experienced and learned.

Now the age old question. If I had to do it all over would I do this same deal the same way again? Knowing what I know now, i would probably have to say no. On one hand, you cannot beat the experience you gain from making mistakes. Do we have to make those mistakes to learn? I do not believe we do. We need to get over ourselves. Stop thinking we are the smartest people in the world. Take the advice from experts, right here on bigger pockets. You don't have to start your real estate investing career in a struggle.

Sorry for the very long winded post. Now I am not saying you should or should not do this deal. The heart of what I'm getting at is deal analysis is probably the most important part of a deal.

Do detailed inspections before you buy.

Seek advice from the pros on bigger pockets

When you think you have that no brainer deal, sit down go over the numbers again. Make sure you have all your bases covered. Plan for the worst case scenario and you will do just fine.

Don't let this post discourage you, I just want to keep you thinking. Is this deal as good as I thought? Are my numbers accurate, or dreamed up to make the deal work.

Lastly, I promise it will be my last paragraph, no matter what you decide, stay persistent and don't let anything get in the way of your dreams. There were many times the idea of walking away crossed my mind. 1 I am not that kind of person, and 2 I know that giving up will never get me to the place I want to be.

Best of luck on your deal

Chris Du Melle