How do I know if its good or not? - Posted by ASantana

Real Estate Investing
1

Posted by GL(ON) on December 31, 2006 at 16:36:30:

The assessment is the property tax assessment. Every property has a certain assessed value for tax purposes. Every year they take the assessed value, multiply by the mil rate and that is how much tax you have to pay.

The 1st mortgage means there is a mortgage on the property and it is assumable. So if you don’t have $2,360,000 cash in your purse (who has LOL) you are going to have to get a mortgage to buy it. Well it’s already there, $1,200,000 and you can assume it which means they can put the mortgage in your name without you having to go to the bank and qualify.

You need a mortgage table book. This is a book with lists of payments for every size of mortgage. According to my book the payment on a $1.2 million mortgage @5.5% interest is $7324.68 per month. You can also use a financial calculator or computer program to figure these things out.

I suggest you start with something smaller than a 25 unit apartment house if you are a beginning investor.

The first thing you need to do is figure out what you want to accomplish. Where do you see yourself a year from now, 5 years, 10 years? How does real estate fit in with your goals?

Real estate is so versatile you can use it to accomplish many different financial goals.

If your goals include owning rental property I will try to help you. On this site you will find many different types of investor who can advise you on all types of real estate investments.

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How do I know if its good or not? - Posted by ASantana

Posted by ASantana on December 31, 2006 at 15:51:34:

This is for sale for 2,360,000:

DESCRIPTION: FIVE STORY WALK-UP APARTMENT BUILDING.

SIZE: 50 X 100 BUILT: 50 X 86

LAYOUT: 21/3, 4/4
TOTAL APARTMENTS: 25 ROOMS: 79

ZONING: R5 FAR (BUILT / ALLOWABLE): 4.3 / 1.25

ASSESSMENT: $422,000 (05/06)
1ST MORTGAGE: $1,200,000 ASSUMABLE @ 5.5% - First Central Savings

I am trying to get the math but I dont understand the 1st mortgage and assessment part. I dont even know where to start if I wanted to figure out the payments or anything. I have been studying and learning all these new terms but then when it comes up in a real situation I go blank. Any advice out there?

3

Re: How do I know if its good or not? - Posted by yert

Posted by yert on January 01, 2007 at 12:43:20:

If you “go blank” when dealing with a real property, then prepare yourself ahead of time with a standard written list of questions and formulas for figuring out any property. You can do this with the help of a book on apartment investing. This will also help you organize your thoughts and questions instead of becoming flustered. Then when you deal with a real property all you need to do is pull out your sheet and “fill in the blanks” with that particular property’s numbers and “crunch” them according to your prepared written formulas to get your answers.
Just remember: garbage in, garbage out. Obtaining the true numbers on a property is the real trick. Also, knowing the right questions to ask.

Also, remember the assessment on the property may be revised upon sale to reflect the new sale price. There may be a big jump in the property taxes.

4

First things first… - Posted by Gary-Oregon

Posted by Gary-Oregon on January 01, 2007 at 02:04:58:

How motivated is the seller? Have you talked to him enough to find out why he is selling,etc.?

Will he carry any portion of the financing? If so, how much?

How much is currently owed on the 1st? I know it was oreiginally for 1.2M This is important because you are trying to figure the equity the seller has in the property.

It is for sale for $2,360,000 (which means you should be able to get it for much cheaper) Is it listed w/ an agent?

Just using the ask price of $2,360,000 less the original loan amount of $1,200,000 would leave seller equity at $1,160,000. (Try to make this number even less by negotiating).

How are you going to come up w/ $1,160,000 (or less) ?? This is the real question. Without knowing how motivated the seller is I (or you ) cannot answer this question.

As far as whether it is a good deal or not is yet another question?? You MUST have the actual expense numbers to calculate the value. You also need to know the capitalization rate for the area and condition of this property. (You might be able to get this information from an appraiser, real estate agent who specializes in apartment buildings, or from your local exchange or investment group.)

The formula is I/R=V

I is net income (Annual gross income, less annual expenses, less a vacancy factor- usually 5 to 10%).

R is rate. (this is the capitalization rate. usually between 9% and 12%. The lower the rate, the more the property is worth. As a buyer, try to get the highest rate possible.

V is value (what value this income stream has at a given capitalization rate).

Good luck and LOL