All Forum Posts by: Page Huyette

Here are my latest numbers (next time I'll clearly post upfront to avoid confusion). I have yearly taxes /ins at $3444, maintenance at 1200/year, trash/water at $1245, loan servicing $108/yr. I've been messing with some of the numbers, keeping some with padding or on higher end.

Also will be using a loc for some of the repairs, so I've factored in payments with extra principal to see if it still cash flows.

Am now playing with 5% interest, no int. only payments to start. Trying to balance what the seller would consider alongside how far I'm willing to go. Hope it's looking better.

Thanks so far for all of the different thoughts--very helpful!

One strategy is to refi in a year with a bank with the option of going with a construction loan to add a 3rd unit.

Another is to rent for a few years, then convert back to a single family (no third unit) and sell. SFR are in high demand in this neighborhood. I would estimate the ARV on the SFR option to be about 370k conservatively.

Just heard that an offer came in last night from another party, so I'll need to decide what to do in the next few hours.

Lynn M. you have some valid points--thank you. I would prefer to take the route you described--laying out terms without an official contract--and have done so for several deals in the past. But since there are two agents involved, and now an offer on the table, that likely wouldn't work in my favor.

I'll keep you posted!

Josh Farrer, I like your out of the box thinking. However, for this particular deal, the owner is a tired, out-of-state landlord that wants to wash their hands of responsibility, so I think getting them to agree to seller financing will be hard enough. I also want to do some work on the place to increase the under market rents, which will show a stronger rent history should we decide to go for a construction loan to add another unit at refi time.

Using your scenario, I'm also assuming they would retain ownership of the property, which could put us in the sticky situation of putting money into a property we do not own--something I am not comfortable with. But, thanks for chiming in to the discussion, I appreciate it.

Thanks for asking Scott W., happy to provide.

Offer: $225k
Projected rents (conservative): 1300 & 825 low end =2125/mo, figure 8% vacancy . Current rents 1100/600

Principal/Interest: $988/month
Insurance:$100 month (high est. with umbrella)
Utilities: $100/month high est. (water) Rents may adjust upward if I pay.

I have my NOI calculated at $1358 with some other items added in (maintenence, loan servicing, cushion).

I pay the $4k closing, delinquent taxes and attorney fees. Owner owns free and clear.

I'm ready to make an offer with a seller financing contingency on a fixer duplex tomorrow, and would greatly appreciate feedback on the terms I plan to put in the offer:

Asking price: $325k. College student rental needing lots of cosmetic work, future roof, general cleanup. DOM around 50 +/-

Pluses: very good location, ability to build 3rd unit in back in the future. Easy to rent, room for rent increases with upgrades & clean-up. Separately metered for gas/elec.

[/b]Minuses:[/b] High prices in this town! Roof needed in about 2 years, asbestos siding should be replaced eventually. One water meter (could submeter if necessary, but for a duplex?)

Here's what I sent over to my agent for discussion earlier today:

$225k purchase price

Contingencies:

10 day inspection period
Closing in 3 weeks or less, dependent upon delivery of loan documents as described below

$1000 earnest money deposit
Buyer to pay closing costs up to $4000.00
Buyer to pay delinquent property taxes up to $1200.00 (approx 1170 delinquent less penalties, next payment due 5/30)

Financing provided by seller based on the following:

$18k cash down payment paid to seller at closing

Promissory note spelling out the terms and interest rate on loan & security documents to be executed by buyer's attorney; attorney fees paid by buyer. Collateral assignment of note and mortgage with legal description to be recorded with county.

Closing to take place through title co.

Balance of loan, less down payment to be financed by seller carried note @ 4.0% for 36 months.

Loan amortized over 30 years, payment due in full on or before month 36. No prepayment penalty. (need help with how to word what happens if month 36 comes--increased interest rate, etc. Assuming attorney will help with this language.)

Interest only payments for first 3 months during property rehab/re-lease period.

Monthly payments for loan, property taxes and insurance to be paid by buyer directly to third-party servicer. All account set-up charges and monthly service charge for loan service to be paid by buyer.

The way I have it calculated, I'd have about $24k to shell out, not counting rehab costs. Estimating rehab about 30k, with 20k ideally happening sooner rather than later, could be 8-10k but rents would suffer.

Plan is to keep upper tenant in place in nicer unit and rehab lower unit, then remove upper tenant, rehab and re-rent. After a year, refi into either conventional or construction loan to build separate 3rd unit depending on how year one goes.

Would LOVE comments, good and bad--thanks guys.

DOT?

Thanks Bill Gulley for your advice. I might be able to purchase, make some minor updates, lease up and then get a construction loan for the third unit. My hunch is that the owner could help with financing, but she is out of state and delinquent on taxes, so not likely a willing participant :)

C'mon peeps. Re-reading this post brought out the bear in me. Bryan Hancock didn't provide a lot of detail, and there was a lot of squashing the thought right off the bat.

One of the main reasons real estate investing is so exciting is the opportunities presented that appear downright scary to others. It all comes down to the numbers and the type of risk you are willing to take. One persons risk is another's pleasure. Don't get all soft on me, just when I'm working the numbers on a similar type of deal (albeit different state with different numbers). Travel with me towards the light, will you?

An update on my above 2/22 post on this topic: Instead of the previous scenario of renting, buy/hold, I'm now looking to move the same house about 4 blocks to a vacant lot in a neighborhood that is doing well with rehabs and sales, all utilities in, then adding a master w/ bath to update the floor plan. Costs are estimated to sell within 8 months or less with an alternate plan to rent or lease-to-own if market softens. House is early 1900's owned by a builder as a rental, little bit of lathe/plaster left, mostly drywall (we'll see), original woodwork, updated windows, flooring, paint, some re-working of the floor plan with some flaws (hence the need for the add'l bedroom/bath to update.) Otherwise a reasonable, sunny layout. Would move to a similar historic neighborhood.

Rough numbers include lot purchase, moving costs, foundation and holding costs with permits around $202k on the high end.

Rehab if we go the route of anticipating higher than usual costs to rehab existing are about 95k. This is a first pass rough estimate.

Sales price on the low end is 335k using an agent, could be 365k. Market is active with low inventory.

Financing options: hard money for ARV @ 8% with 4 points gives me about 40k profit. Could try to work a rehab loan with a local bank, or the other possibility, which I'm having trouble figuring: owner carry of lot for short term, then either refinance if we need to hold, or sell and pay off.

Would love the expert advice from you guys with related or seasoned experience.

I recently had a similar situation, house sitting on the market, seller's agent and seller not terribly helpful with info on the property beyond the basics. I was working with a buyer's agent not by choice but because we'd worked together on another deal and he brought it to my attention thinking I might be interested.

Before even seeing the inside, I could tell roughly what work needed to be done to increase rents and appeal, and asked him to see if the seller would consider financing so I could put more of my money into the rehab. They said maybe but for a short time. I did more research, and decided to let the property sit longer to see what happens--no offer. It may work out in the future, but if not, on to the next one.

I wouldn't get too attached to a single property. Use this one as a learning tool, if it works out the way you want it great. If not, adjust and find the next one.