All Forum Posts by: Account Closed

I looked at my first rental property today, it was 2 Duplexes(4 units) on one parcel, 100% occupied, all on month-to-month leases. Area is mostly multi family homes, especially duplexes Before I explain any further, here are the numbers:

List price: $87,500

Tax Value $113,000

Rent per unit: $400

Gross Monthly Rent: $1600

Annual Taxes: $1370

Annual Insurance: $1100

He agreed(verbally) that he would let me buy it for $80,000 cash. I would get the cash from a loan from my grandfather with zero down and 5.2% interest for 30 years amort. Comparable duplexes are selling for 30-40K but are in need of a good amount of work. As for the subject property, the owner had bought it and renovated 3 of the units(the 4th units tenant has been there for 12 years, didn't want his unit renovated) however, after looking at the property I can see that there are a few things that need to be done but overall this seems like the best deal anywhere close to me. Assuming the tenant in the un renovated unit stays which is likely, I estimate just a few thousand in repairs and most of those are cosmetic, of course the inspection might show otherwise. 

While I was viewing, I noticed one of the closets had a fowl smell in it, but neither me, the owner, or tenant could tell what it was. Another tenant was complaining because their front door was not properly sealed, and cold air was rushing in, but I assume this is probably an easy fix. The thing I'm most worried about was in the 12 year tenants unit(who was not home at the time of viewing), it was the only unit un-renovated, the smell of cigarette smoke was strong and there were black steaks on the paneling of the walls in the living room. They are small units so I was thinking maybe it was just the smoking in a small space for such a long time.

The seller would like to do a 10 day due diligence period, and wants to close by March 20th. At this point, everything is verbal, I told him to let me think about it for a day or two before signing anything. I was a little overwhelmed since it was my first showing and really don't want to miss anything. I do not have a real estate agent and would rather not pay one if possible, as I don't think the seller would consider paying the agent and I pretty certain I can handle it on my own. He did seem very open about the property, didn't seem like he was trying to hide anything. 

-What do you guys think about this non-refundable due diligence fee, is this standard? I would hate to pay this and the property turn out to be a total disaster during due diligence and not get that money back. 

-What would be my next steps assuming I would like to pursue this property? I know you submit an offer to purchase, you have a due diligence period where you get inspections and an appraisal, and you need title insurance, and a real estate attorney, which order do these occur in?

-What documents should I get from the seller before beginning due diligence? I have heard on here about making sure to include in the contract that the due diligence period will start upon receipt of required information so the seller can't waste your DD time. 

-Am I missing anything in this situation, or i there anything I should be alarmed about? 

Sorry this is so long, I just want to make sure I cover everything. Answers to any or all question are much appreciated! 

@Kyle Gregg Thanks for the reply! I'll have reserves of about $2500 at the time of closing after paying for closing costs and down payment which total around $6500-7000, and my income is actually closer to $1000/month, although my past 2 years W-2 statements say much less, so I know I won't get credit for my current income. Financially wise, I'm not worried about being able to handle the payments, maintenance etc. In addition to my job, I also get about 10k/year in a financial aid refund(in the form of grants, and after paying tuition/fees/books). I get $5000 in August and $5000 in January, which will go straight into the reserve funds.

So right now for instance, I currently pay around $600/month in rent not including utilities, so my financial aid pretty much goes to paying rent and food with some left over. That being said, even if there were no tenants I would still be able to handle making the mortgage payments since they would be roughly equal to what I pay now, and I would also have a reserve fund just in case. 

I'm in the process of looking at lenders, I guess I'm not really going to know my approval odds until I apply or talk to a loan officer, I'm just a little confused about how they factor a co signers income into the decision, but again that probably depends on the lender.

So I'm a Sophomore in college, have a part time job making about $500/month, 717 credit score. Currently pay about 600/month for rent,  although I pay using financial aid from school. I'm trying to buy a small multi family to save money on rent and hopefully make a profit in the mean time. 

I'm looking at a 4 unit building, all are currently rented at 400/month,  or $1200/month not including the unit I would live in. And the property is listed at $87,500. 

I want to get an FHA loan, and put down 3.5%. I'm just worried about getting approved for a loan because of my low income. I do have a family member that said they would Co sign on the loan for me. He is retired but collects around 60-70K/year of income from various sources, good credit, no debt and assets totaling 2-3 million including 3 rental properties. I know FHA allows for a Co signer, but how is there income figured into the decision? You guys think I'd have a chance of getting approved? I've heard they count 100% of a Co signers income, but I've also heard you must qualify on your own a certain amount, any advice would be appreciated!

@Sebastian Konior It depend on which state you're in. In Illinois, if you want to work for yourself or be a broker in charge, you must obtain a Managing Broker License. To get one, you must 21 years old, have an active Illinois Real Estate License for 2 of the past 3 years, and complete a 165 hour course and take the exams.

So at first, yes you would have to, but prices usually run around $100-200 per month plus a commission of each transaction, but can vary greatly among different firms. So if I were you, I would go ahead and work on getting my Broker License and then start working for a RE firm. They usually provide training for new agents, because most of the Pre-licensing course involves Real Estate tax and law, rather than actually teaching you how to be an agent. Plus there are all of the networking benefits etc, etc. Then after you have your license for 2 years work on getting the Managing license allowing you to quite working for a firm, and also saving money. 

Im going through the same thing right now although I live in NC, I either have to work for a firm and pay monthly even when not pursuing deals, or complete three 30-hour post licensing courses as fast as possible to lift my provisional status. All together getting your license is definitely worth it, after only doing a deal or two per year you more than make up the cost of getting and keeping your license.