All Forum Posts by: Andrew Bosworth

Some additional monthly expenses I am factoring:

-Vacancy (8.33%): $132.08

-Maintenance (12%): $190

-Management: It will be self-managed, but I factor 8%, which would be $127

No major repairs, just needs a cosmetic face lift prior to bringing in new tenants.  Since the leases are in force, I would inherit the existing tenants.  The current owner pays the water, but that is something I would transition over to future tenants.  No other expenses paid by owner.

For my calculations I factor 100% financing, which would result in a first year cash flow of $275/month. 

It is my understanding that the seller doesn't want to landlord any longer, but there is no rush to sell the property.  Call them semi-motivated.  It surprised me that they are willing to sell it for that much below the appraisal, so that is the lone red flag. 

Looking at what would be my first multi-unit property.  Would appreciate feedback.

It is located close to a major college (branch campus), which is rapidly growing.  It is also close to a small international airport, state capital, hospitals and more.  The town is in the process of building a new high school campus as well as recently starting a multi-million dollar streetscape improvement project. 

Here are the details: 

4 unit property, fully occupied (4 one bedroom units)

Price: $92,500

Recently appraised for $116,000

Total monthly rents: $1,585

Property Taxes: $2,900

Insurance: $600

Water/Sewer: $1,500

The property is in good condition, though three of the four units could use some cosmetic updates.  Existing rents are also a bit low.  I would aim to get the total rent to $1,750 within the next 12 months. 

Deal or no deal?

When trying to access this file it takes me to a dead link.  Can anyone post a link to the file?  Thank you.

Derek,

Welcome to BP!  THANK YOU for your service in the Army.

Sounds like you have a lot working in your favor. A VA loan will allow you to put little down, but get a lot in return. Leverage your resources. Personally I wouldn't recommend anything less than 20% down if this was your own single family dwelling, but this will be a business for you. If you can find a property that needs some renovations (nothing major for your first one), that you can force some instant appreciation and get rented, this will be a good start.

You might want to find your niche and get good at that before getting into other types of rentals (vacation, etc.).  Though once you do, you could experiment with the vacation rentals....live in one unit, rent two out full time and use the fourth unit as a vacation rental.  Puerto Rico seems like it would be a good place to get into the vacation rental market.

Best wishes!  Let me know how it goes.

Thomas,

Figures, I stopped reading at page 7999.  ; )

You make a good point though.  How this deal could be perceived did cross my mind - though there was no ill intent.  Ultimately I would be taking a bigger risk by structuring it this way.  Additionally, it could be argued that purchasing at a higher price helps increase the value of other local properties, albeit minimal.  

We hear about creative financing on BP all the time...just trying to think out of the box a bit.  Though, IMO, the ethics behind what we do is paramount.  To me it is not worth risking reputation, morals, etc. simply to get a deal.

Brandon,

I've successfully used a Home Equity Line of Credit.  A local credit union offers up to 90% of equity at 3.75%. Used this cash to purchase and renovate my first property, then did a cash-out refinance once I had a tenant. Got my money back and am looking for my next property. Not for everyone, but it worked even better than I imagined. I'm hooked!  This is one of the few times when your house is actually an asset.  Yeah Rich Dad!

Jordan,

I've never purchased a property this way before, so I might be way off, but...

You're right....the appraisal wouldn't be based on a previous sales price, but rather the current purchase price (what I pay for it today).  Any agreement that the seller and I would make outside of the sales transaction would not be considered when doing the appraisal...the appraiser is looking at sales comps and income.  When the property is appraised for the loan, the lender will lend up to 80% of the purchase price.  Without making any immediate improvements to the property in order to force appreciation, I am essentially trying to force appreciation through a higher sales price.  Ideally the higher sales price would then be off-set by the seller's assistance. 

All this to say, the seller and I could not agree on a price, so I passed on the property.

Has anyone else has ever tried this method?

Thanks for the feedback Dave.

Wayne, why is this?

Glen,

Curious...Who was the "full service company"?