Posted by Rich-CA on December 30, 2007 at 21:49:40:
Great, detailed post.
Duplex in Queen city - Posted by kac2010
Posted by kac2010 on December 30, 2007 at 07:45:26:
I ran across a 4 plex in my wife home town of Cincinnatti. A pretty good neighborhood. Mostly, SFH just 2 other 4 plex. Property was foreclosed on. Last ower purchased for 100K. Appraised for around 110K. We live in Tn and have several SFH and we have been " playing" landlord on the side
for 6 years. My brother in-law is a contractor in Cincinatti so there wouldn’t be a problem with repair. The place was fully rented before the bank toook over. Checked out financing,somewhat, in Cincinnatti to no avail. Tried before with our bank but, it’s more of a regional bank and they didn’t wanna finace a property 360 miles away. How are any investor getting finaced in other states??? Here are some numbers.
3510 Ravenwood
COST: $75,000
DOWN: $0
REHAB COST: $20,000
LOAN: $95,000
YEARS: 20
INTEREST: 7.30%
MORTGAGE: $754
#UNITS: 4
RENT: $550
MONTHLY: $2,200
GROSS: $26,400
INSURANCE: $1,000
TAXES: $2,558
REPAIR: $1,800
Gas/Electric: $2,664
Water/Sewer: $800
Myran 7%: $1,848
TOTAL: $10,670
%Expense: 40.42%
Monthly Expense: $889.17
NET: $557.10
GRM: 3.60
Re: Duplex in Queen city - Posted by kac2010
Posted by kac2010 on December 31, 2007 at 07:15:23:
I really appreciate the response. I agree with both assumptions, except the no 100% finance. I think it depends on how hard your area was hit with forclosures. Just 3 weeks ago we did a 100%'er and around 3 1/2 months ago we financed for 100%. We also just had a house appraised and it should be a 100%'er. I just need to call the bank about the numbers.
Bottom Line more Revealing than Top Line - Posted by Jimmy
Posted by Jimmy on December 31, 2007 at 06:08:34:
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you left out vacancy expense. its a killer, particularly in 4-plexes. you should assume it will run 15% of your gross rent. at the end of the year, check the math. see if actual collections are $22,440 or $26,400. since this is a F/C, you can’t ask for tax returns, but I guarantee you this: if the prior owner had 100% occupancy, he would not have been in F/C.
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owner-paid utilities. this is STUPID. are the units submetered? can you get that monkey off you back? it represents 13% of your rents! this is not an item that we include in a standard expense load.
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here’s a safer way to look at this: assume a 40% expense load before debt service, but add to this load the management fees and utes. that will put our load at 60%. you may think I’m crazy…I’m not. I own a lot of rental properties, including a lot of 4-plexes.
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this can still be a good deal. but you need to go into it with your eyes open. I didn’t bother asking about the rehab budget guess. I assume you have done this many times before, and can accurately estimate big jobs.
Just… Numbers on a page - Posted by JT-IN
Posted by JT-IN on December 30, 2007 at 16:53:05:
In today’s market you are not likely to obtain 100% financing for purchase and rehab costs, without having any of your funds in the deal, on investment property. That train has left the station.
You make a number of assumptions on this property for expenses, rehab costs and rents… where do these come from…? Yes, I know some of the numbers come from public record for taxes, and no problem with the insurance number… but water is low and Gas/Elec won’t fly. The property is listed as having seperate utils, but then shows “Heating: Gas, Hot Water” on the MLS sheet, so not tenant paid, apparently. The gas bills alone could approach $ 800+ in winter months for this type of unit; they are off the charts. This will kill your projections.
My point is that a few hundred bucks one way or the other here makes the case that you present one of a completely different situation. The other factor is you list the income as 48 months of fully paid rents, whcih isn’t likely to happen in today’s market, with the tenant pool in that area. I would be more comfortanle using 40 months of rent, which makes your gross rents 20-22K annually. Using that number, then re-calc your GRM, etc, etc…
There is nothing outstanding about this property… The price figured is FMV. The rehab costs estimated are probably too low, and the rents estimated are too high…
But this wasn’t really your question, I think you asked about financing. You can expect to put down 15-20% out of pocket, plus your closing costs (another 5K); so about 20-25K out of pocket. Again, this skews your numbers and theory greatly. The market for financing has changed substantially, and for the very reason that this property was in foreclosure to begin with. The buyer paid 110K for this property in 6/04 with a mtg of 110K. The minute that the going gets tough, and it always seems to, when there is no money in the deal by the owner, they seem to bolt. Statistics seem to bear this out and therein is the reason that the ole 100% financing deal on investment property is no longer out there.
Now if you could buy this property for 45K, maybe 50K, then you have something to talk about…
Just the way that I view things…
JT-IN
Re: Duplex in Queen city - Posted by JT-IN
Posted by JT-IN on December 31, 2007 at 16:11:42:
100% financing was a SFH or 4 plex…?
Who was the lender who provided the financing…? AND What were the costs, fees and points paid…?
Just curious.
JT-IN
PS. OH is number one in the nation in foreclosures by percentage of existing mtg’s in FC. Locally, (and I am in Cincy), it has always been very difficult to obtain a 100% inv loan for multi-fam property. Not to say that these couldn’t be broker’d with out of town funds, but your question was regarding local financing, and the answer is that local lenders always have been CONSERVATIVE, and even more so now, as you would imagine.