All Forum Posts by: Andre P.

If it is their primary residence the first 250k of gains on a sale are tax free, no 1031 exchange needed. They can sell the house (no taxes on the gains) keep whatever cash they want.

There aren't enough details here to give you an answer. What is the money for? What are the terms for each loan? What is your expected ARV and plan to pay those loans back?

Ok, so my thoughts to your points.

1. Utilities are the renters responsibility so don't factor that in.

2. As far as insurance goes, external parts may be covered by the assoc. unless your tenant burns the place down, or some other problem originates in the unit they own. So in addition to their renters insurance, you'll need to get insurance as well - don't guess, get a quote, should only take a few minutes but I'm betting it will be more than $50.

3. All those items (and associated %) are taken from your gross rent. Being conservative you should plan for 2-3 months of vacancy initially so you can get your rehab done then plan for 6% from then on (6% of 1800 = $108). CapEx/Maintenance can be lumped together to include any and all repairs/issues that you may need to address, again as a % of gross rent, peoples number for this varies, but let's say since it's a condo it will be lower, so we can use 15%, which is $270.

So take your 1800 rent minus your PITI (1358), vacancy (108), and CapEx (270) gives you a cash flow of $64, before any insurance numbers which I again bet is going to be more than $50/mo. I would pass, I personally hate HOA's and avoid them like the plauge.

If you're not sure how to analyze and understand the numbers of a rental, do some more research here before buying anything and getting underwater.

If you would qualify for conventional financing why not just shop around to find a lender who doesn't sell to Fannie Mae so you don't have to worry about the restrictions from them, credit unions and smaller banks seem like a good option to start.

As far as seller financing, I have not had any experience with that so someone smarter than me will have to chime in.

Perhaps an easier way would be to have them sign a lease with the current landlord, then everyone is on the same page.

When you're ready to buy, look at purchasing a small 2-4 unit building that you can live in while renting out the other units, FHA loans require low money down and some can even include rehab costs.

Be diligent about saving and being smart with your money now, having a cushion in your bank account when you're ready to start can potentially make the difference between success and failure.

Good Luck!

@Logan White

@Mitch Messer gave excellent advice. Without knowing what your specific goals are, you can't develop a strategy, I'm sure that being in the military you're well versed in how that applies.

It sounds like you've got a great start- good luck!

Most people here use GRM (Gross Rent Multiplier) to determine what type of value a multifamily is and how it compares to other similar properties, you'll probably want to start there in terms of valuation.

I think the only thing you're forgetting is vacancy- you certainly can't be 100% occupied while rehabbing, so be sure to plan for that. Otherwise seems like a decent deal given your numbers.

@Brandon Turner @Julie Marquez

I'm having the same issue with the promo code as well, bummer!

A few thoughts.... you don't say what the taxes and insurance are on this property but I would imagine they would both be pretty high, have you gotten a quote on insurance?

You don't take in to account vacancy, let's say that's 10% (of gross), which is $420 dollars then you need to set aside money for maintenance, etc. Others on the forum just lump it all together under operating/capex expenses and put it at around 35% of gross rent which is $1470.

$1470 is more than the $820 you'll be left with each month after you pay your mortgage.

Another point to consider with this deal is how much cash will you have in the bank? Can you deal with one or two empty units for 3 months? Is the building currently rented, if not you'll have vacancy right off the bat.

I'm certainly no expert but I think you'd need to get a better price before you'd want to move forward, or at least get more details and take a second hard look at the numbers.

Good luck!