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I've borrowed several hundred thousand dollars for my business and no one would give a loan to a Corp. without a personal guarantee. Especially if you've not been in business long.

I was told you never under any circumstances want to buy a property with a C corp FYI. Capital Gains are not treated the same as an S Corp or an LLC (or even personal) and you end up paying much more in taxes if you sell down the line.

I'm far from an expert. Perhaps other members know more. I know this wasn't your question anyway. Sorry to hijack!

MikeOH and the others are correct. I would just keep looking and making offers on properties where the 45-50% expenses would still allow you to cash flow. It would certainly lower your risk and get you started at least with a fighting chance. Like all the guru's on here say, just don't pay retail. This is where so many new investors fail (I've nearly fallen into this trap). I've found this problem where I was interested in 2-3 4 plexes. All listed WAY too high. All of them sold within 2 weeks near the asking price. If I used MikeOH's rule of thumb of 45-50%, I may break even but more than likely losing about $50 a unit. So... I wait in frustration. It seems more and more newbie investors keep buying all these apt. buildings are retail and thus hard to make the numbers work.

Now, with that said, maybe 1 day I will find something I can make the numbers work. No hurry... I'm not going to fall in love with any 1 house or apartment. There will be another.

HOW DOES ONE EXPLODE? No, wait, nevermind. I don't want to know. :shock:

The only thing I read about this was that if you pay the tax bill on the property, you move to #1 position ahead of even the first mortgage and can forclose on the property.

I've done this analysis on these apartments once back in 2000 and again now. They were selling one after another for about $95k in 2000 and now about $170k. Rents honestly haven't increased much that I can tell.

Seems like apartments in this area have been going for $400-$450 for about 10 years now with no increase. (even when property was $95k).

So if I would have bought back in 2000, paid $90k then, rents were still $425 or so. 3br houses in the area are selling for about $80k and renting for $600. I guess I should have bought 10 years ago.

Thanks MikeOH. I pretty much knew that you were going to say that. LOL

It's what you said basically, their's always someone who will buy it and pay too much. On that same street this year, $175k, $175k, $169k, and $169k sales prices so I had thought $155k would probably be a decent deal to get me started. When you put it at 100% financing, definitely kills all the cash flow which was minimal. Looks like these guys were all overpaying at retail then.

I definitely don't want to fall in love with a property, that would be the kiss of death. This one was just in close proximity to me where I could monitor it closely. It's certainly going to be difficult for me to find a home/apt fitting that criteria but when I do, it will be worth it.

Do you ever find deals like that on the MLS? I am going to start doing to REI meetings monthly to see if I can network. The good deals never make it to the MLS i presume.

Oh yes, I agree. This board has been great in helping me not overlook the things many new landlords do (hopefully). I would have NEVER thought that expenses would be 50% of gross rent had I not read the forum. Books I've read don't estimate them that high so I'm thankful.

I would definitely offer less than the $164900 asking price because he is so motivated. I did the figures on 160k, but anything less than that would just be more monthly money in my pocket.

I have more $$ than just the 20% down as a reserve. I just thought that's what I'd put down since it was my first deal. After a few months/year whatever, if all goes well, I thought I would just pull much of the equity back out and reinvest more in a 2nd rental property.

Thnx

MikeOH,

New price, lowed to $164900. Seller has told me directly that he is VERY motivated to sell since having bypass surgery (will take less). Paid $140k 4 years ago. I have a 20% down payment in cash. Based upon a 160k purchase price and your 45-50% expenses of Gross Rent, it looks like this will cash flow.

What do you think about that? Still too high in price?

Thx

I sold my wife on eBay.... got 9.99 plus $25 shipping.