Before I mail this … - Posted by Bert G
Posted by Bert G on May 14, 1999 at 21:14:45:
I’ve typed up a letter of intent to the realtor to pass on to the listing agent to pass on to the seller. (oh boy, roadblocks). Just wanted to run this by ya’ll to see if I’m doing the right thing.
The property is a very nice 3-story 6-plex of one-bedroom units. The rents range from $300 to $400 each, all on identical apartments, so it shouldn’t be hard to give the lower-priced ones a healthy bump to bring them up to local market levels. I’m projecting a NOI of $14,500, based on the current rents. Yes, I included a reserve for repairs and a cut for my own time. After taking out another 15% for profit, it leaves $850 a month for debt service. (P&I)
The owner is anxious to unload this. He’s halfway accross the country and has his “party-girl” 21 yr old daughter mis-managing the place. It really doesn’t need much work at all, but the tenants are all complainig about the lack of maintenance. Anyhoo, the seller started out asking $165 K a bit over a year ago. By March he’d dropped his listing price to $152,900
I’m offering $130K, $20K down and the rest seller carryback or contract for deed at 9% 30yr P&I, with a 5 yr balloon. I figure this will give me enough time to establish a track record for the property and get other financing. Also, this will throw off enough cash flow to get my down payment back in about 5.5 years. After all the dust settles, the seller will have received (P&I + balloon) just under $160K.
I used a form from the local realtor and after figuring tax and equity buildup it yeilds about 33% ROI. Yea, I know equity doesn’t mean much for you flippers, but I actually enjoy being a landlord and plan to hold the thing for at least 10 years.
So whaddya think???