All Forum Posts by: Pierre M.

Tim,

I'm looking for those same deals as well but I see multi-families usually give me better cash flow. Plus, I won't lose all of my income for that property should one of my tenants decide to move or act up.

Thank you all for your replies.

I have decided not to pursue this property as my appraiser told me it may be only worth $100k based on recent sales for similar properties. I have asked my Realtor to propose that the seller reduce her price due to the value of the property likely to return $50k difference in asking price and market value. The seller is reluctant to lower the sale price to less than $145k. According to the sellers Realtor, this is not a distressed sale. I believe it is - why would anyone want to sell in a down market especially if she has both units rented out?

I will wait a couple of months and try to present another offer if the property is still available.

That's my biggest mistake to date since I am not considering my primary residence an investment.

Thank you guys very much for your help. I am going to back out of the contract if it is accepted. I doubt they will accept the offer the way it is.

I think I need to keep learning and studying but most importantly LOOK at more properties. This is the 5th place I looked at and put in the offer because the last two places I waited too long to act. This duplex has been on the MLS for less than 3 days.

I'll use the 50% rule as my foundation and work from there.

Thanks again Wheatie, Mike and Jason!

Mike, Very Good Stuff! I understand your point and it makes perfect sense. I am still learning and I'm taking in everyone input.

I'm sorry I keep stretching this but I still have a couple more questions. See if you agree ... If this is acquired through financing, I would skip the first months mtg payment and therefore the first months profits can be added into my yearly profits or towards expenses.

Second question is do you factor in the closing costs as an expense?

Oh ... one more question ... Am I allowed to talk to the current tenants about their current lease, how they pay, payment habit, etc? Another option is that I can possibly increase rents to make this a cash flowing property.

Based on what I have learned here ... I would say that I need to acquire this property at $80K then I could expect to cash flow $100 per door. Right?

Thanks for all your help guys .... I am slowly learning and soon I will get my hands on a good cash flowing property.

Thanks Mike for your input.

I'm quickly starting to see how this is not a deal I thought it was.

Mike, do you use percentages for the expenses you listed (expenses I left out) to evaluate your deals?

Thanks again for your help.

Jason,

I hope my previous post outlined my plan. I think my partner would put 30% down and based on current rates we'd be in the high 6's for an investment property. I've included that breakdown below:

Term 30 Years Fixed
Interest rate: 6.750%
Loan amount: $ 91,000.00
Monthly payment: $ 590.22 a month

Gross Rents = 1500
NOI = 750
MTG = 590

$160 Cash flow per month

Is this right?

PM_Broker

Wheatie,

Thanks for your reply. The reason I included a breakdown of the expenses is to show that there is a little room to make profit. Am I correct to assume a 10% vacancy when these renters have been in place for over a year and show interest in continuing to stay or can that be reduced to make room for profit? Plus if I ask the tenants to pay water and do the lawn wouldn't that jeopardize my occupancy rate? Are my maintenance estimates high? Are you basing your calculations on the 50% rule? If this is based on the 50% rule then I don't think this is a wise investment. But if I can somehow use the real numbers then I think this may be a decent deal. Should I lower my offer to reflect a $100 per door cash flow based on the 50% rule?

Also, I am putting this offer with an "and or assigns" clause. Just in case my due diligence returns an unfavorable profit margin for me I can wholesale it. If I can get the deal at $130,000 my plan is to take on a partner (out of state family member) who will inject the down payment and I will manage the property for them locally. Which means I need this to cash flow with the management fee included. My other option is to wholesale it for a couple grand profit. What do you think? How can I make this into a deal?

PM_Broker

I'm putting my first offer on an investment property ever. This is a duplex currently listed for $149,900. Took a look at one unit today and it appeared to be in great shape. The other was not available. Based on my assessment, I believe it requires very minor touch up (Less than $100). This is a duplex with 2/1 on each side. Each unit is currently occupied by sisters with teenage daughters and rents at $750 each. Rents have been the same since 2 years ago. I used rentometer and it returned a median rent at $995. Both tenants would love to stay after purchase. One currently on month to month lease and the other is wanting to renew a yearly.

Gross Rents = 1500
NOI = 750

My offer would be $130,000 ... here we go

Monthly expenses:
Taxes = 109
Insurance = 113
Water/Sewer = 100 (tenants take care of (very small) lawn in lieu of seller paying water)
*Management = 100 (paid to me)
*Maintenance = 150
*Vacancy (10%) = 150
*Total expenses = 722

* my estimates

I asked an appraiser to do a look up for me and he will get back to me on Monday. The contract would be contingent upon partners approval, financing, appraisal and buyer to approve of second unit. Realtor says second unit is nicer and cleaner than the one I saw. I included info from the county appraisers office:

2007 Value
Comparable Sales value based on sales from 2005-2006: $148,100
F.S. 553.844 Just/Market Value: $122,700
Assessed Value/ SOH Cap: $122,700
History Taxable Value: $122,700

online value tools:
Realquest says 147,000
realestateabc says 209,000

Any help, advice, suggestions would greatly be appreciated.

PM_Broker

Jason,

Any updates on this deal?