All Forum Posts by: Kevin Siedlecki

@Will Gaston - "Livable" is the keyword, and you say it might be. That makes all the difference. If it will pass inspections for a livable unit, then the low rent is a product of the poor but livable condition, and there should be no ethical or legal issues with this.

@Trevor Crowell - SFRs are tough in most markets. I have found that small multi-families in B and C neighborhoods work the best where I am, but you should be able to find something if your searching the entire midwest. There are definitely areas that will not support renting SFRs if you buy right now at retail, but there are also definitely areas that will.

I'm not familiar with the acronym COL- what do you mean by that?  

@Kevin McCann - 2 things. 

1) You do not need a mortgage on the house to refi. You can cash-out a free and clear property, or to pay off any other liens, as long as the refi will be first position lien. 

2) If you get a mortgage and her name is on the purchase, then she is much more likely to be liable than if she is the lender. If she is the lender, then there should be a clause in the contract, like all mortgage agreements, that she is not liable for anything.

@Victoria Bounassi - I agree with a lot of what was said here, but do appreciate what you've said about not knowing your exact situation. What follows here is meant to help, not judge.

 @Tony Gunter's point might be the most important point here that isn't simply shaming you for not keeping your house in decent shape. If you and no one in the household can pay $100 for a lawnmower, then I am guessing no one is paying taxes or insurance either. That is a big problem, and something you need to figure out, or your family is going to lose whatever your grandma had to give you as inheritance. 

@Marcelo Ricarte - Not really. Two structures might mean slightly higher expenses for things like the roof and siding when they need to be replaced, but comparing that with units in one building depends on how that one building is laid out. All three units would probably still have stairs and landings for an entrance. If they were in the same building, that building would be bigger, with a  larger roof, than the one with only two units. So while you might be a little higher on the expenses in those big things, it certainly won't be double. The biggest regular expenses you'll incur are debt service, taxes, and insurance. Those are based on the value and usage of the property.

@Rick Santasiere - Looks like a great deal. Congrats! 

Surely curiosity, and not judging, is what is motivating @Brent Coombs to ask about the CapRate valuation. When I just ran it quickly, I got the same cap rate at the current price, but changing the price changes the cap rate. At $183k, it's about a 10% cap. In CT, that is reasonable (although as you and others have said, meaningless on a residential property). I think since you didn't explain that in the first post, Brent was confused about how you got there. 

@Paul Honen - Check out the blog post I wrote about initial analysis. It should help a lot!

https://www.biggerpockets.com/blogs/6815/45137-my-...

@Antonio Foster - Not sure about the law in Texas, but in my state, you'd need to get a broker's license. That will involve taking a course and taking a test that will go over all the steps. It is a very bad idea to try to sell someone else's house with no experience. You'll get yourself into legal and possibly financial trouble.

@Pete K. - The numbers analysis looks good to me. Since you are financing it, I would look at COC first, and Cap Rate second. Both numbers look very good - a little too good, in fact. What is the going cap rate range in the market? 12% is really high in most places, as is 20% COC. Does the place have a lot of deferred maintenance that is going to eat it not hat NOI for the first few years? Is it in a bad neighborhood? Are the tenants actually paying their rent? These are the things I'd look at when I see such good numbers on initial analysis.

@Colby Osborne - Run away. Run far away. Run far away as fast as you can. Run far and fast while listening to the BP Podcast to learn more about understanding expenses.

In all seriousness, it's smart of you to throw this out here to get some feedback before moving forward. What is the amortization on the financing? You say expenses at $3300, but that would be just the P+I if your owner financing is 20 years. Even that long is rare in owner-financing. If you have talked the seller into a 30-year term, then you might have room to cover taxes and insurance in that $3300, but you'll also have to include maintenance, CapEx, vacancy, water/sewer, etc in your analysis. You don't have to to do much analysis to see this is a huge loser; I'm talking about 5-figure losses per year.

I don't know your market, but with those financing terms (assuming 20-year amort) and $2900/mo gross income, I wouldn't go over $300,000 in my market.