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Good Deal? - Posted by Chris Gibson
Posted by Chris Gibson on July 02, 2005 at 01:12:18:
Summary of Your Deal With the Owner:
This deal is a 4-plex on the market with a realator. I can get a morgage of 90% of the 330,000 which is 300,000 (which is also the sale price.) I would be walking into this deal with appox. 30,000 equity.I will be able to get closing costs covered and approx. 4,000 cash (hopefully more depending on appraisal value.)
Right now all four of the units are filled. One 2-bedroom and three 3-bedroom. The two bedroom is has a section 8 tenant ($730/month. The other three 3-bedroom units are $500, $850, and $600 respectivly. All units totaling $2680/month for rent.
My PITI would conservitively be $2,500/month
And there has been an average of $318/month utilities expenses $79.5/per unit. Three of these would be covered by tenants the sec. 8 I would have to payfor.
Gross Rent $2,680
Total Expenses $2,580
NOI $ 100
The way I figure I can go in and pursue sec 8 tenants and put them in rents guranteed @
2-bed $730
3-bed $957
This will increase my cash flow and value of property.
Any suggestion?
What else should I look for?
Re: Good Deal? - Posted by Ronnie (Tx)
Posted by Ronnie (Tx) on July 02, 2005 at 13:05:02:
It is strange to me that when you post a question looking for advice,
and you get total agreement not to do it, you are still trying to justify
it.
In simple math, you are looking at 4% profit. What happens if you can’t
rent out one of the units? At best, you are running -$400. That is is
nothing else goes wrong like Michaela said. If your cheapest room is
vacant for a month and a half, there goes half of your profit for the
year. Save enough for taxes yet?
Phil had a point about bringing the units up to market price. If you do
that, you might be able to squeeze out a better cashflow. My question
is why are two of the three bedroom units cheaper than the two
bedroom?
I am with everyone else. Walk. Better yet run. There are better deals to
be had than that.
Ronnie
Re: Good Deal? - Posted by Chris Gibson
Posted by Chris Gibson on July 02, 2005 at 11:36:20:
This is a nothing down deal. I get 30,000 in equity. In a silent second held by the owner (if that is legal in colorado) The section 8’s will increase my cashflow by about 400/month up to 500/month total. I will also receive 4000 of so at closing for vacancies etc.
Re: Good Deal? - Posted by Phil
Posted by Phil on July 02, 2005 at 10:41:08:
I have to say the other two posters are correct. But, if
the rents are way too low, and if you could take on 150 or more to each rent, you may be able to do somthing. But I would walk away from this one. Try not to get attached to any deal, for me its all in the numbers, if they are not right, I can’t get involved.
Re: Good Deal? - Posted by Randy (SD)
Posted by Randy (SD) on July 02, 2005 at 09:47:17:
Your 90% financing is 90% of the sales price $300,000 NOT 90% of the appraised value of $330,000 which means your loan will be $270,000. So as michaela-ATL posted you have a $30,000 down payment for the privilege of receiving $100 a month positive cash flow. If we’re understanding your numbers correctly, I agree this is no deal… better doublecheck your numbers.
Re: Good Deal? - Posted by michaela-ATL
Posted by michaela-ATL on July 02, 2005 at 06:09:58:
If you changed teh ‘normal’ tenants into section 8 ones, then you’d have to pay their utilities? There goes your cashflow.
Also, if you have to put down 30k, then you need to consider the value of that money into your expenses. Basically, you pay 30k for the ‘privilege’ to break even on this deal. hm…
What about repairs, vacancies, other maintenance costs? It looks to me, as if you have not included those into your calculations.
Doesn’t look like anything I would want.
Michaela
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Re: Good Deal? - Posted by IB (NJ)
Posted by IB (NJ) on July 02, 2005 at 16:04:18:
Everyone’s correct. I’d like to add that if that ‘silent second’ is silent to the lender funding this deal, it could also be illegal.
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