All Forum Posts by: Patrick M.

So I made an offer on a REO property being represented by a realtor that I found through Zillow. He told me the bank that owned the property, provided a contract template, and I filled it out and provided an offer. Today, AFTER the offer, he tells me that he submitted it to the bank via offersubmission.com and that there will be a $300 fee to the Buyer (me) at closing for doing so.

This seems insane to me. He knows who the bank is, but he has to put my emailed PDF offer in a special website to send it in so that I get charged $300?

Does anybody have any experience with this and can tell me what is going on? Thanks!

I've found what I think is a good unit- a foreclosure where:

1. Prior owner has been evicted and unit has been re-keyed.
2. Interior is in good shape and with a thorough cleaning, is more or less in move-in condition. (I will still do a full inspection with a licensed inspector)

3. Property is owned by a bank. 

4. Realtor showing it says there are no liens, though clearly I would check via Title Search.

Building is from 1970s era, but is maintained reasonably well from exterior walkabout. Rent would be $625/month with water included for 1 BR/1 BA.

The listing is online for about $80k. That said, none of the units in the building have sold for more than 72K since the financial crisis hit. The last market sale for a unit was $60k. 

My instinct is to offer $50k - $60k and ask for money towards closing costs. Is this going to be attractive to a REO or will they reject it? Would they counter offer, or do they just want to unload? I have a 790+ credit score and financing pre-approved.

I am wondering if there are ways to make closing costs more predictable by picking a certain day of the month over others? How the escrow/etc gets tabulated always appears mysterious to me and I would like to be better at modeling these costs in my pro formas. How can I improve my predictions of the size of closing costs on my transactions?

1) it's HOA, so be certain rentals are allowed

YES. Property is about 40-60 units of this type total, probably 90%-plus rental.

2) can you be sure that the HOA will NEVER disallow rentals

Property has been this way for 15 years.

3) vacancies of 4/12 = 33%, so FMV immediately becomes lower than FMV * 0.4 in my book

For one year, that's the math. I am pretty confident I could be at full lease-up starting this summer on 12-month rollover leases.

Okay, I think I've found a good property to target in my college town.  Here are the details:

Property: 4 br / 4 ba unit, 1250 sq ft, in MF complex with individual lock-able bed/bath suites

Rent: Currently $1600-$1700 in identical units

Target purchase price: $135,000

Monthly HOA Dues: $200

Prpty Mgmt Firm: $165 (10%)

Monthly Taxes: Approx. $200

I have access to financing with no PMI at 3.25% through the credit union. My credit score is above 800.

When I run my spreadsheet, this seems to have roughly a $100 per month clear on the door, so I'm interested. Here's the timing issue: it's presently vacant. We're approaching mid-February in a college town. Everybody who came for the spring semester already arrived, and nobody will be here for the fall semester for months.

As I peruse other units being marketed for when the current tenants move out, unsurprisingly, they are all June/July/August. Leases seem to be 12 month everywhere.

If you were making an offer, would you start with what you consider a fair offer (i.e. $135,000) but then work back from that number to the amount the empty months would depreciate the price? As an example, if I closed on April 1, I would still likely have 3-4 months vacancy on the mortgage before I had a tenant under lease in July or August. This means I would back out $4800 to $6800 and offer $128k to $130k.  Thoughts?

 So that 100k would include the 55k for the improvements? Or buy for 100k plus be willing to do 55k in improvements?  Just in case it wasn't clear above, rent if all spruced up would be 1500-1600/month.  Thanks!

I'm looking at a duplex in a college town. The unit was built in 1962 and has two 1BR/1BA units about 600 sq feet each that show their age. If I took the duplex up to the prevailing new/fancy standard for rehabs in town (black appliances, new cabinets, fresh pergo floors, etc) I think they could each rent for $720-$800/month. Location is very good with direct bus to campus, two popular coffee shops nearby. Very safe neighborhood.

To hit that standard, it probably needs:

1. new roof (1300 sq ft?)

2. new windows (12 of them)

3. new floors in one of two units (600 sq feet)

4. updated kitchen

I'm guessing I might be able to do this and get the units up to snuff for $55,000.

I think the property has modest appreciation potential but strong rental growth potential. Neighborhood is mix of rental and single family, with SF homes showing strong appreciation.

Given all this, if you wanted $100/door, what would you pay for this duplex?

Thanks for all the replies! I
@Bill Jacobsen

@Bill Jacobsen

@Bill Jacobsen -

Looking into deferred maintenance. I have been following the property and the manager is supposed to be sharing a long term capital plan at the March 2014 board meeting. Am considering waiting until this comes through before making an offer. Same with reserves. 12-month leases are the norm here.

On insurance, the last unit I looked at my insurer (Nationwide) said I could cover a rental dwelling for less than $200 extra/year. I have everything except my life insurance there. (though that did not include an umbrella policy, which might be another $100-150/year)

@Ross Leavitt

I've seen these units rented by the bedroom or by the whole. I'm going to talk to a few property managers for what they'd recommend in this market.

@Aaron Montague

The credit union where I am a member has a 5-year ARM at 3.25%, no PMI, at 80% LTV that is eligible for rentals. At the first reset the max it can jump to is 5.25%. I figure this is 10 years at 4.25% on average or better, with plenty of opportunity to refi to fixed in that timeframe. This gives me a mortgage payment of $487 to start.

@Sharon Tzib

I think the practice at the property is to have tenants pay the water bill, but good point on understanding the utility burn rate. On the capital expense side, I was thinking that with some undergraduates, I could expect some additional appliance wear/tear/etc. Trying to be conservative. The dues were quoted from realtor.com and I now have a HOA budget summary sheet for the fiscal year citing dues of $125/month and an annual capital reserve fee due each March of $225, once per year. Obviously I need to seek the full annual budget document.

Hi there- I'm in a college market and have the following property in my sights:

Property: 4 br / 4 ba unit, 1250 sq ft, in MF complex with individual lock-able bed/bath suites

Rent: Currently $1650

Target purchase price: $140,000

Monthly HOA Dues: $200

Prpty Mgmt Firm: $165 (10%)

Monthly Taxes: Approx. $200

The complex is relatively new (built late 1990s) and on a direct bus line to campus, where parking is difficult/expensive.

I'm figuring about $1400 a year in capital refurbishment after any improvements that are captured via the $200/mo HOA dues. Look good? What else would you want to know before pulling the trigger?