All Forum Posts by: Rod Smith

Let me explain! I have an opportunity to purchase a 4 unit multi-family rental propery which should be a good income producing property. I am concerned a little about the rents being charged currently, but it still makes sense. 2 of the 4 units are currently rented for $450.00 per month and if purchased, I plan to upgrade the other 2 a bit to justify charging $550.00. Each unit is 2 bdrs, 1 1/2 ba townhouse.

Anyway, that is just a little background. My main dilemna is if I purchase this property, the 25% downpayment my lender is requiring will just about wipe out my cash/money set aside to invest. Or I can buy the property and get my money back slowly over the next couple of years.

On one hand, I think it is an awesome opportunity because I would be getting 4 units under one roof, with little to know renovation needed and only have to pay closing costs once versus trying to chop the money up and buy a duplex now and maybe another in 6 months. Not to mention that the per unit price of the quad is actually lower than what I would pay per unit for 2 duplexes.

So, what do you think BiggerPockets? Go for the good investment or hold on to more of my cash for a rainy day! If I am able to keep my vacancy rate low, I can recoup my investment in a few short years and maybe even buy something else in a year, but it will be tight for that first year.

FYI: I do have a full time job so I am not depending on this money to live, but it is my cash reserve.

Your comments and advice will be greatly appreciated.

Thanks....I was leaning towards the cashflow so your input has made me feel like I am on the right path!! I will let you know if I feel the same way after going inside this weekend.

Thanks @Brett Russell . You make an excellent point. I plan to keep these houses at least 20 yrs, so you are right, appreciation doesn't matter.

Working on the financing now!!!

I agree with @Michael Herr . Over time I learned how to be proactive and minimize my turnover costs. Great point!

Thanks @Michael Seeker

and @Randy Duncan ! Both of you make a lot of sense.

Here are the details:

1 House:

• 3 br, 2 1/2 ba TH (No HOA in place, which kind of concerns me)
• no rehab needed
• Tenant in place paying $675/mo. Lease ends June 2014
• $40k

2 House pkg deal:

• (2) 3 br, 1 ba SFR (1 block, 1 brick)
• no rehab needed to my knowledge. (Doing full walk-thru this weekend)
• Tenants in one paying $500. Other should rent for the same.
• $45k for both.

I have rented to section 8 tenants on 3 different occasions and have no complaints. The one good thing is, depending on what portion of the rent the tenant is responsible for, most of your money is guaranteed. (i.e. no worrying about whether or not your rent is going to be on time).

You already said you will screen the potential tenant heavily, which is good. Just make sure they know you will inspect regularly and everything will be okay.

I will warn you though, in my experience, a lot of section 8 tenants are not the best house keepers and the fact that they have small kids adds to the mess. So be prepared to paint and clean or replace carpet when they move out.

If you go into it with the right expectations, I think you will be fine!

Oh, one more thing..... In some lower income areas the amount of rent you can get from section 8 is higher than most none section 8 tenants can comfortably pay, so you may be able to charge $550-$600/unit.

Thanks

Thanks for the feedback.

@Brian L. - The owner claims the houses to not need any rehab, only cosmetics, but I have not been inside yet. I saw the outside and so far they appear to need minimal rehab. I will be going inside both houses this weekend. I know one of them has tenants, possibly both, but that does not always mean the house is good shape.

@Jon Klaus - I have asked about owner financing and he does not want to do that. He is an older man that never financed any of the homes he owns (approx. 80-90), so he wants all his money at once. The rent for about $550/mo. I can get both houses for $45k.

Hello Biggerpockets friends,

I invest in rural areas in the south and while looking for properties this weekend I was presented with a unique opportunity. A long time investor is getting older and is unloading some of his houses. He has offered to sell me 2 houses for what I was willing to pay for 1 in another town about 25 miles away, with tenants.

The catch is, the 2 houses are located in a smaller town with little growth or appreciation potential. They are also less than $30k, so I will most likely not be able to obtain financing.

My question is, if I am able to find a way to purchase the 2 properties, should I ignore the appreciation piece of the puzzle and just go for cash flow? (I forgot to mention that despite the difference in location, the average rent is not that much less)

Also, any suggestions on obtaining financing for deals under $30K?

Your feedback will be greatly appreciated.

Hello Biggerpockets friends,

I invest in rural areas in the south and while looking for properties this weekend I was presented with a unique opportunity. I have an opportunity to purchase 2 houses for what I was willing to pay for 1, with tenants.

The catch is, the 2 houses are located in a smaller town with little growth or appreciation potential. They are also less than $30k, so I will most likely not be able to obtain financing.

My question is, if I am able to find a way to purchase the 2 properties, should I ignore the appreciation piece of the puzzle and just go for cash flow? (I forgot to mention that despite the difference in location, the average rent is not that much less)

Also, any suggestions on obtaining financing for deals under $30K?