All Forum Posts by: Mariah Jeffery

I just viewed a 4-unit REO property that will come on the market tomorrow. It's in good shape structurally except for frozen pipes, which is a pretty big deal. Cosmetically, it needs a lot of work. I estimated $22K worth of work, so I'm factoring in $35K to be safe. It last rented for $600/unit including gas and water. This was over 1.5 years ago before the foreclosure. I was planning to put in electric water heaters or possibly even get it metered separately. Since it's been vacant for so long, I can't get an accurate rent or utility bill number, but I think the $600 with gas could be raised to $625, since this is a strong rental market. I think they could bring $550-$575 w/ no utilities included. The agent expects a list price of between $60K-$80K.

It's a cattle ranch. I guess that would have been important to mention.

The land is divided into 12 plots. All of the plots have water, but some have it in an inconvenient way. The owner wasted something like $30k on a dry well right by her house and then paid to run a line over to a really good well a couple miles away on a different plot (that she owns). I'm not sure if this water issue could cause problems if we try to sell it in 12 separate plots rather than all together, since some of the individual plots do not have water. I'm not sure what exactly you mean by "water rights", but I'm assuming it has to do with having access to water.

A elderly family member has a 1,300 acre ranch that she's looking to sell. She claims it's worth at least $1M, but she's willing to sell for $750K to family, in exchange for a minor concession (i.e., another family member gets to keep his job there for at least 3 more years). I have looked at a few commercial listings of similar land in the area, and based on price per square foot of the *list* price, it looks like the land should conservatively be worth anywhere from $1.5M to $7.5M. However, I admittedly know nothing about ranches. How do I go about finding a better estimate of the value? How do I find out if it can be divided and sold in smaller increments.

I obviously have a lot more research to do. Where do I start?

Rich -
The reasons I'm buying properties in Rapid City are a) cash flow opportunities are few and far between in the Portland area (the 1% rule is almost unheard of, much less 2%) and b) my father in law lives in Rapid City and manages the properties for us at a very low cost.

Don -
I don't know the answers to these questions, so I guess I have a lot more research to do!

Thanks to both.
MJ

Rich -

I have looked into that. The lot is not quite big enough to be split, unless the neighbor would be willing to sell me a small chunk of his land. It's a possibility, but not one I can count on. This one would be very difficult to sell, so I would plan to buy and hold for a very long time.

How much higher is maintenance on a mobile home?

By the way, this property is in your home state of South Dakota (Rapid City).

-MJ

I know someone who has 65 properties and has offered to sell me any of them at the tax assessed value. For this particular county, the values usually run 10-15% lower than the market value on average, but there is a lot of variability, and some are 20-30% below. These are the ones I'm trying to find. They are all in decent (but not excellent) shape with tenants currently in them.

One of the seller's properties has 3 mobile homes and one single family home on it. Asking price: $94K. Total rents $2,000/month. All utilities paid by tenants. This meets the 2% rule, and property taxes would be pretty low (~$1,950/year). I have asked around about financing, and so far the best I can find is 20% down, 6.75% on a 25-year loan with a 15-year balloon (so I would probably pay it off in 15 years because I don't like to gamble).

I calculate the cash flow to be $388 (not quite $100/door but not bad for a 15 year mortgage; I get $534 if I plug in 25 years.) and the 30-year IRR to be a whopping 36%. This seems like an outstanding deal, but I know very little about mobile homes. Is there anything I should change in my analysis? Is maintenance higher for mobile homes than single families?

Thanks!
MJ

Actually, that is how we ended up doing it. I found out that two of these properties are on the same tax lot, and then there was no way I was going to agree to let my earnest money be at stake if I couldn't find a way to finance that one. We closed on one already, will close on the next two in two weeks, and we're still trying to work out a deal on the others.

Were you able to find financing for this, or were you trying to buy it in cash? I am interested in buying two properties on one tax lot, and finding financing with a fixed interest rate is providing to be challenging.

I'm still trying to find financing for this. Any mortgage brokers out there who can help me? I've found plenty of lenders willing to give me a variable interest rate loan, but I need a fixed rate.

I think I am close to an agreement to purchase six properties from the same seller. They are approximately 30% below market value.

My husband and I would each purchase three properties in our own names, to minimize the number of mortgages we have. We each already have one investment property with a mortgage, and our primary residence mortgage is in his name only. I have owned my investment property for 2.5 years, and we are closing on his triplex this week. We are planning to buy one each per month for the next three months. I am concerned that lenders will not want to lend to us on so many investment properties so quickly, even though we have ~780 FICOs, plenty of W2 income, and low DTI. The others more than pay for themselves with $100+ cashflow per property, so our debt to income ratio should improve. Should I be concerned? The seller wants earnest money on all six properties with no financing contingency, since the main reason he is discounting them so much is because we are buying six (we still have inspection contingency).

The seller is not willing to owner carry because he’s 87 and will probably die in a few months, so he wants his money now. I tried and tried, but he won’t budge. I suppose if he’s going to give me my price, I’ll give him his terms, especially since we have the cash for the 25% down payments.

We may try to buy one of them (currently vacant) as a second home.

Even though it would actually increase our cash needed for a down payment, I’m considering trying to buy one or two of these properties in cash, if the seller will consider allocating something very small (around $20K) to one or more properties. The market value for these properties is between $70K-$95K but our package price will be just over $55K per property. I’m not sure if the seller will balk at allocating $20K to a $70K property because I haven’t asked him yet.

Are there any other creative strategies I can try to minimize the down payments and/or reduce the number of mortgages? Any other suggestions would be appreciated.

By the way, the package includes five SFR’s and one duplex. Four of them are right in a row on the same street.

Thanks,
MJ