I need help with this duplex! (long) - Posted by Carey_PA

Posted by Carey_PA on November 07, 2000 at 22:19:52:


you don’t think there is any “ethical” way to do this deal from my standpoint, i’m not saying he would go for the deal, but IS there one here IF things were to be done the right way??

thanks buddy,


I need help with this duplex! (long) - Posted by Carey_PA

Posted by Carey_PA on November 07, 2000 at 20:09:45:

Hello all,

I called on an ad where a guy was offering no money down on a duplex, possibly a triplex.

Here’s the info I got thus far:

He wants 218K because that’s how much he would need to pay off the remaining mortgage and to pay the 1% transfer tax on he and his ex-wife. (1% each)

He said the place could easily get appriased for 240k-260k. He said if i wanted to make it a no money down deal, he would write up the offer for the 240-260k price and get an appraisal on that, but then at closing only get 218k and then i would use the remainder of the money to pay closing costs and to put in my pocket or to put some money into the building. Now, I’m new to this type of deal so that sounds a little fishy to me! But hey what do i know, that’s why I come here for you all to SAVE ME!

Here’s some more info:
top apartment 3br/1ba. rents for $900/mo
bottom apart. 3br/2ba. rents for $850/mo
THere’s a total number of 2 acres with the duplex.
He also rents out 1 acre to a landscaper for $500/mo (not during the months of nov.-april though)
Total sq. footage is around 4500 sq. ft.

He said his 1st mortgage is around $1380
and his 2nd mortgage is around $200 something…the total comes to just about $1600.

He says he pays $45/mo in electricity
there is onsite sewer and water so he said he doesn’t pay anything for that (although her replaced the water pump in the spring)
He pays roughly $2200/yr in taxes
and around $1200/yr in insurance
HE also said there is NO license or anything needed to rent in the area, but i don’t believe that! I think there is one needed and it’s fairly inexpensive.

He told me he just about breaks even. BUT here is the kicker, where I think this place has potential although keep in mind I’m new to this type of deal.

#1 I believe he doesn’t charge enough in rent. The rents in that area could easily get AT LEAST $1,000. (he told me the landlord before him rented the top floor out for $1400/mo, but had 6 college guys living there)

#2 The place use to be a triplex. But now the 3rd potential apartment is being used for tenant storage and his storage. He said it needs to have some work put into it to make it an apartment again. (this would have 2 huge bedrooms)

THe homes right down from this duplex are valued at $450k and the neighoborhood is fairly ritzy if ya know what i mean…and it’s right near the college. There is also a new golf course being built down the road from the place.

He says an acre of land in this area could go for $110k-$115k BUT remember that’s HIM saying it…I went on loopnet just to see and i did find .30 acres in the nearby area for sale for $110k but it was zoned C-2. (i don’t know if that means anything)

HE TOLD ME THAT HE’S not looking to make any money out of this deal, he just wants to get rid of it. He’s relocating because of a job and he just got divorced. HE said he’d even show me his loan papers that he has to prove that the mortgage payments he has are real…

So, what does everyone think? I’m going to look at the place on Saturday morning…



Re: I need help with this duplex! (long) - Posted by SueC

Posted by SueC on November 08, 2000 at 08:33:34:

Get your own appraisal done. Forget the extra lot, unless you verify with the landcaper he’ll keep renting from you. (This seller can’t be breaking even if he’s not getting that $500 for 6 mos. out of the year - do the math!)

Count this place as 2 apts. Even with all that, his rent barely covers his mortgage, and does not cover his taxes or insurance, let alone anything for maintenance, vacancy, etc.

This isn’t worth it. The fraud potential makes it even worse. You’d have to do a more thorough anlysis of the income and expenses of the property, to find out at what price this would work, but you can check the Commercial forum for messages in the archives on this. Too detailed for me to go into here.

Re: I need help with this duplex! (long) - Posted by JPiper

Posted by JPiper on November 08, 2000 at 24:53:01:

Aside from the comments Phil made, this is no deal at either the reduced price or inflated price. This deal is going to be a negative cash flow deal from day one. Figure your numbers using 35-40% expense figures…you’ll see what I mean.


Red Flags Red Flags Red Flags - Posted by phil fernandez

Posted by phil fernandez on November 07, 2000 at 20:53:36:

Hi Carey,

There are too many red flags here.

Red flag #1 : A triplex that is REALLY only a duplex. There will be alot less rents from two units then three units.

Red flag #2 : Sounds like fraud to me. He’ll get an appraisal of $240,000 - $260,000. But he will sell on paper to you for $218,000 and you can pocket the rest. I hope the lender is appraised of this situation.
Cause if they aren’t, it’s probably defrauding the lender.

Red Falg #3 : The extra lot worth, what he says is worth $110,000 to $115,000. Wheres the prove. And it is not easy to just loop off an acre of land. Let him do the seperating, going through zoning meetings and the like. My guess is he won’t get the proper variances to create another lot. But I’m not in your neighborhood.

Red Flag #4 : He has in the past rented to a bunch of college students. That will surely mess up the cashflow numbers. On paper the rent from the six students looks good, but how much of that rent will you really collect and how about the damage they will cause. So you will want to dismiss any income from college students.

All in all, this seller is looking for a sucker. Don’t be that sucker. Too many red flags on this one.