All Forum Posts by: Nathan Samuelson

Great, thank you all for the responses.

@Anthony Gayden - Yes, under the current lease contract, the owner pays all utilities. But I think this could be changed under a new lease contract, couldn't it?

Good afternoon BP!

So there's a 4 plex rental property in my town that has been on the market for about 6 months now and I wanted to ask you all some questions on whether or not I should go ahead and take this deal. The property is located near a college, so that's what really sparked my interest.

Anyway, the property is currently on the market for $52,500, and according to the city assessor, it's assessed value is $55.200.

I've been talking to the agent assigned to this home and I asked if the seller would be interested in a "Subject To" contract. The agent said the seller would entertain contracts. I asked about typical vacancy rates and supposedly it's almost always 100% occupied. Which I figured it wouldn't take long to fill, since it's literally 1 block away from a college.

The agent said the property looks good on outside, has new metal roof, but needs work on inside and that the seller is willing to do some repairs on.

Now, currently I am located in California until I EAS out of the Marine Corps, so I haven't personally seen the property, but my family is located just 10 minutes away from this property, and I could have my father go in and inspect it in my absence. (I will be returning shortly). I'd have my father look at big ticket items like water heaters, furnaces, etc and how new they are.

One of the concerns I have is, in 2008, this area was flooded (a lot of the city was flooded, causing millions of dollars worth of damages) and this property was one of the ones that was hit by it. I am not sure if insurance usually covers things like that...

According to the seller, the average monthly gas for the past 2 years is $201. The Average monthly electric for past year is $131. Current rent per unit is as follows:

Unit #1- $300

Unit #2- $400

Unit #3- $325

Unit #4- $450

So in total, total rent collected per month is: $1475.00. Subtract the total cost in gas / electric, that totals to $1143.00 a month profit. Now, if I'd assume the current owners mortgage, that'd subtract about $394.00 a month (which includes insurance, and mortgage combined).

So after all expenses are taken out, I could potentially see an average monthly cash-flow of $749.00 or about $9,000 a year.

Current tenants are on a month to month lease, so buyer can get new tenants if desired. Which leads me to my next question...If I were to assume ownership of this property, could I charge water and gas to the new tenants, if I put it in the new lease agreement? Would it be as simple as just putting it in the lease contract that tenants pay water and gas and electric? Just a hypothetical question, not saying I would, but I would consider it if I were to assume ownership of this property.

I think that's all I have for now, I would definitely appreciate feedback concerning this! Hope you all are having a wonderful BP day!

-Nathan

@Account Closed You make a lot of really good points. Especially about making claims such as telling the seller you can help fix their credit.Thanks for the response!

Thank you for the link and information Dawn and Stephen! These responses have definitely cleared some things up for me. Really appreciate everyone's comments.

@Bryan L. That clears it up, thank you for the quick response. I agree, if I have to fork out $1,000 in order to get the house without having to touch my own credit, that is fine by me (like you said though, assuming the deal is still worth it). That was my biggest question was, if the seller is so strapped for cash, why would they choose to become homeless when I walk away with everything, and them with nothing? How would they afford to live anywhere else? -- Thank you for clearing it up.

@Shawn Mcenteer I've never heard of Pod Cast 65, I'll have to look them up. Thanks for the refferal.

@Brian Gibbons Great information, thank you. I never really thought of starting out with a 2-4 unit property, but I may start looking into it. I am definitely not turned away from landlord responsibilities. It's kind of cool too, because in just a matter of 5 days of looking, I've already built my buyers / renters list to over 50 people in my area, so I know there is a lot of interest! I'd have to figure out the math of everything of course, but it seems like it'd be a good option if done properly. Thank you again for the info.

Good evening everyone,

I looked around on a couple of threads posted on this site, but didn't quite get the answer I was looking for, so I figured I'd just ask here! (Sorry if this has been asked a thousand times, which I'm sure it has)...

My question is, when trying to convince a seller to do a "subject to" deal and the seller asks "Where am I going to live after you take the deed to the house?" - How do I answer that, or what can I say to convince them it's a good deal? I know Subject To deals can save the sellers credit, and that in itself is good and often a selling point...but where does the seller live afterwords? Do they just normally find a place to live that's cheaper? Like moving into a mobile home or apartment? I have heard of buyers offering 1-2 thousand for moving costs, as a sort of incentive (and / or also paying off any liens against the title if not too high).

If the seller accepts a Subject To, they must have had some problems paying their mortgage, so how can they expect to take out another loan, or come up with any sort of money, if they needed it in the first place?

I guess in my head right now, it doesn't seem logical...."Let me take your house because you have no money and can't pay your bills...now sign over your house to me. Now you have no house AND no money - good luck."

Hopefully this makes sense. Thank you all in advance for responding!

@Wayne Brooks - Thank you for the advice. I definitely want to do this the right way and not wind up in jail or anything remotely close to that.

@Eric Dufault - Thank you for the link! Has a lot of great info on there. Really appreciate it. I wasn't aware that I could use my VA loan on a "Fixer Upper" home. Looks like I'll be scheduling an appointment with the VA and look more into this.

@Matthew Marksbury

Kind of off topic, but since I know people are looking here I figured I'd ask. So I might be looking at going into the RE business with a friend of mine, where we'd be splitting everything 50/50...I'm not really sure how that'd work. Does anyone have any business advice on how to go about doing this with a business partner? Or know of a thread that might already be started with this info? At first thought, it seems like it'd be less helpful to have a business partner in this type of market...

Thanks again for the replies!

Thank you for the replies everyone. @Wayne Brooks and @Michael Murray, I was hoping to rent out this property, or even just re-sell it after repairs are done to it. (I plan on doing this with multiple homes, specifically HUD homes since they tend to go lower then other homes -sometimes-). According to another source I just read, an individual can only use a 203k loan if they plan on being the primary resident. How would anyone know what I planned on doing with the loan (how would anyone find out if I rented the home out or not?) Would the lender really care all that much where the money comes from, as long as I'm paying them back anyway?

@Matthew Marksbury, I like where you're going with this. It sounds like it'd be a good checks/balances because if the deal would be potentially bad, I'd not get the funding...which since I'm new to this could definitely save me some money by not doing bad deals.

Are there any fee's if the loan is paid back early? And is it a fixed rate?

I see the Loan Term is 6 months, but is extendable. How much can the loan be extended? It appears your lenders will only lend if I plan on selling the house right away (opposed to renting it out), is that correct?

Using the example you provided, total PROFIT would be $45,000. How much of that would go back to your lender / you? I guess a better question would be what % of my profit goes back to you and your lender for fee's and stuff? So how much would actually go in my pocket after the deal is done and I have paid back the lender / you? Sorry if that question is confusing.

Oh! And I plan on using my VA loan for my primary residence, wherever that may be. I don't plan on using that for a while though until I am situated back into the groove of things. Until then, I'm just going to go live with a friend.

Thanks again for all of your help!

Good evening everyone! So I have been trying to access the HUD webpage but it appears to be down, I'm getting the error "Page Not Found. We're sorry! This page cannot be found. Please visit the HUD Homepage or use the search box above to find what you are looking for."

So I figured I'd ask here in hopes that someone could help me out.

Ok, so here's the deal...I'm new to Real Estate. I've got the basics down (I think) and I am seeking more knowledge about the subject. One of the big problems I'm having is "where to get money"? I see a lot of potential in purchasing HUD homes, re-habbing them, and either renting them out or selling them after it's fixed up. Of course I do my research to the best of my ability (I am not a licensed REA, so I can't access the MLS) by using Realtor.com. I look for homes that have SOLD within the last 6 months within a .25 mile radius of the HUD home I'm looking to buy, so I can better price my bid...I know how to install kitchens, lay carpet, paint, ... pretty much everything cosmetic, so total cost put into the house will be cheaper then hiring a contractor....Anyway, if I plan on selling the house after I get it at a good deal, I'd like to tell cash buyers in my area first to see if they're interested, or put it on the market, all for ~15% cheaper then retail value. My stipulations would be I have to make at least 15k profit minimum if I were to sell it outright after fixing it up, otherwise I'd look at other options.....

Anyway, my only qualm right now is, Where do I get the money for this? I am too new to the business and I dont know of any private lenders who'd lend to me because I have no track record, and I know banks don't really like giving out loans for home repair purposes. What are my other options to even buy this house? I've heard of the 203k loan, but can that be used to PURCHASE the HUD home? Or do I have to BUY the home FIRST, and then get the 203k loan?

Any help you can provide is greatly appreciated!!

-Nathan