Posted by Brenda K on June 13, 2000 at 24:51:39:
So if the average 3 bedroom place in an area was renting for about 600/month what would be the most you guys would pay for a house?? a duplex??
Can some one double check these numbers?? - Posted by New Guy
Posted by New Guy on June 12, 2000 at 13:09:36:
In the midst of putting together my first deal.
I think I have all the costs accounted for but would like some one to double check things that I have made assumptions on.
The asking price or this duplex is $89,900 and I am going to ask $80,000 which is right around market price. It is in great shape so I am willing to pay this for it.
Rents are $575 each for a total of $13800/year gross income.
I am being conservative in my numbers I hope so here are my assumptions of expenses.
Vacancy Allowance: 8% of Gross or $1104.00 (1 month)
Water/Sewer: $50/qtr/unit or $480
Gas, Elec etc… By Tenant
Lawn/snow: myself
Maintenance: $50/unit/month or $1200
Insurance: $300/year
Taxes: $1800/year
Misc: $500
Total Expenses as I have it are: $5384.00
Financing:
I can get a mortgage for 9.75% with 10% down which I am getting from a home equity line. Payment would be $618.59/month (12) = $7423.
This leaves me with a positive cash flow of at least $993/year in this sceanario.
My question is do these numbers seem to be good assumptions? Can I write an offer and have it be contingent on approving the actual expenses and making sure I am still getting a positve cash flow or once I sign the offer am I locked in?
Also my broker said she will write the offer but in Carlton Sheets thing it said that I should write my own offers - which is better? Why?
Finally based on the information here, does this seem like a deal to go ahead with?
Thanks everyone for your help!
Re: Can some one double check these numbers?? - Posted by dd
Posted by dd on June 12, 2000 at 17:15:04:
Always write your own offers----why??? Becausethe likelihood of a normal re salesperson addressing all your concerns in a deal is slim and none. There are many different clauses which need to be added to define the parameters of your deal. Can you make an offer subject to your verification of actual expenses for the past two years----you bet you can. You can make your offer subject to anything you want!!! In rental property it is always necessary to make your offer subject to the review and approval of all leases currently in place on a property. How would you like to buy a place and then find out a tenant (friend of the previous owner) has a long term lease that doesn’t allow for rent increases??? That’s just one of many scenarios. Hope this helps, lol.
Re: Can some one double check these numbers?? - Posted by Terry Heilman
Posted by Terry Heilman on June 12, 2000 at 16:35:32:
I agree with the previous comments. Also, if the market is $80,000 and the owner has it listed for $89,000 are they really motivated to sell? I would offer $50,000 to see the sellers and agents response.
Re: Can some one double check these numbers?? - Posted by JPiper
Posted by JPiper on June 12, 2000 at 14:05:14:
It looks like you left the interest cost of your $8K down payment from your equity line out of the mix. Depending on what that rate is…the puts a real dent in the cashflow. You also don’t mention closing costs…which when added to your down payment will serve to boost the interest cost of your draw from your credit line.
I think your total expenses are probably in the ballpark…but they probably won’t be for the specific items that you mentioned. Either way though, this deal probably won’t give you much, if any, positive cash flow. Your money is going to have to be made over time, through increasing the rents, and perhaps some appreciation if it occurs. That isn’t called “making money going into the deal”.
The basic problem with the deal is that you’re evidently buying at market, and you’re financing 100%. Hard to see why that seems attractive to you.
JPiper