All Forum Posts by: Dan Simpson

 There's aren't too many 4 units in this area and the only ones that would go for that price are going to be located in shady areas that I don't want to deal with. 

There are many duplexes with 2 or 3 bedrooms with only 1400-1600 gross income for sale in this price range. Apparently people are buying them.

I estimated $50 a month for landscape/mowing and 8% CAPEX

I ran the numbers on Bigger Pocket's rental calculator based on 3% income increase, 1% property value increase and 2% expense increase.

Here is what I got:

15% of gross is about right for CAPEX in this area. Thankfully the major things (roof, AC/furnace) are newer.

I'm running a ghost ad for the unit so we'll see what kind of response I get. The current owner says he's never had trouble renting it and the renter who just moved out was in it for 8 years. They relocated to another state.

Yeah, I'm looking at this as a long-term investment. I'm not going to make a killing the first five years but after the refi the income will be very nice.

Thanks for your input Mike!

Pre-payment penalty is $36k.

Yes, the utilities are separate and paid for by the tenants. 

The neighborhood is definitely a B or at worst a high C. Very convenient location.

I've asked a realtor for a CMA but he says duplexes like that are so rare that it's hard to get an accurate CMA. But there are smaller duplexes with less income selling in that price range so I'm okay with the price. Plus the owner bought it for more money a few years ago, $205k I think he said, but he had to put in a lot of work to get it spruced up to where it is now.

The 17 yr amortization definitely hinders cash flow but in the long run this thing could be a major cash cow once I refi into a 30 yr loan.

May I ask what specifically you like about the deal?

Taxes run about 120 a month, insurance another 80. That is included in the $1450 payment I mentioned above. The gross income right now is $2050.

I honestly cannot see how expenses would be half of $2050 per month in this case

So there's a duplex in my area for sale for $198,500. The owner wants 10% down and will finance the rest at 4.5% interest amortized over 17 years on a 5 year balloon with a pre-payment penalty if refinanced before the 5 yrs is up.

The total PITI would be 1,450 a month. One side is leased now for $950, 7 months left on the rent. The other side is currently unoccupied. Both units are over 2,400 square feet and are walkout basement style units with 4 bedrooms each. The unoccupied one is the only unit I've seen and it needs new carpet, paint, wallpaper taken down, the usual cosmetics. It'll take $5,000 or so to bring it up to speed. The owner claims that the other side is in better condition, something I'll verify later once he knows I'm a serious buyer. The market rent for these units is over $1,100 a month. If I buy I plan on renting this side out for that amount which would bring the gross income to $2,050 a month. Once the rent can be raised on the other side we're looking at $2,200 a month total gross income.

Tenants pay all expenses except yard work which would run around $50 a month for 8 months per year.

The roof and AC/furnace units in each units are newer.

I have two single family houses that I plan on flipping but I've never been a landlord nor have I analyzed many duplex or multi-family deals, but can you guys tell me your thoughts on this deal?

I'm interested in the deal for the following reasons:

- Duplexes like this one are hard to find in this area and rent out quickly. They rarely come up for sale. Only one similar duplex (walkout with over 2,000 S.F. per unit) in this entire area of 500,000 people was even sold last year.

- The potential cash flow. Right off the bat it's $600 per month before expenses. Once the rent is raised on the other side it goes up to $750 per month. After I am able to refinance it into a 30 yr mortgage after 5 years, the cash flow before expenses could go as high as $1,500 a month, This doesn't even consider future rent increases.

- The terms. He wants only 10% down. Most lenders or even private sellers selling with owner financing would want 20%. And 4.5% is a solid interest rate in today's market

- The potential of me moving into one of the units at a later date to save $$$, especially if I refinance it as an owner-occupant

Thoughts?

Michael, 

The Frank Dodd Act is one of the reasons I'm not gonna be into owner financing this lady or anyone else. 

I was really hoping to sell this one in this deal but this gal has poor ratios and her mom, who was going to co sign, has credit issues related to some past medical bills so they got turned down.

It's move on time... 

I know Brian, I'm going to sell it outright for cash. The ARV is not inflated. We're going to sell it on our own with no realtor.

If I were to do a lease option or rent, I'd go for 750-800 a month. That's a plan B. I want a cash sale though.

So I bought a fixer house for $40k and got a loan from the bank for $51k for the purchase price and fix up costs. I have about 57k total in the house. One of the folks I had working on the house has a daughter who wants to buy the house, but she applied and did not get a loan. I was going to sell it for 79k to her.

Since they can't get the loan, they want me to carry back the mortgage after giving me 6k down. I'm against this for several reasons, not the least of which I want to cash out and take 20 or so grand and move on, and because I won't have much cash flow if I finance her. The most I could cash flow on this house is $250 a month or so. 

She can't do a lease option because she says she can't pay more than 600 a month. The market rent is around $750 which is what I'd want on a L/O.

I know the easy answer is to shoot down the idea and try to sell it outright, but I'm afraid I'm going to have a hard time telling these people no. But I gotta stick to my guns, right?

Anyone else been in a similar position?