Posted by Eric in FL on July 01, 2008 at 08:56:59:
Jimmy,
Great analysis. Do you still have entire blocks you are buying up in your target markets? I would think doing onesies and twosies in bad neighborhoods would not get you the high occupancy rates you achieve. Mass purchase equals bigger discount and neighborhood forces reputation overhaul. Thanks.
Best Regards,
Eric
Duplex Opportunity - Posted by Brandon ( IL )
Posted by Brandon ( IL ) on June 30, 2008 at 20:52:42:
Relatively novice investor, looking to expand my portfolio.
Have a lead on a property locally in a borderline area of town. Owner said she would be willing to sell property via bond for deed at ‘no interest’ in exchange for 5K down up front. Pretty old property, build around 1910 or so.
70K total price
5K down
$550 / Month Payments
One unit currently rented for $450, other unoccupied. She claims neither unit needs rehab, I have yet to go inspect in person but I’m assuming that’s true… I asked why she’s selling, she stated that she wasn’t meant to be a landlord, lives a little too far from the properties to confidently manage them, and is tired of trying to multitask with her daily agent duties. Basically a burnt out landlord with little experience and some negative history, from the sounds of it.
She says she’s owned it for 4 years. She’s an agent so I’m assuming she understands the longterm ramifications of financing a property at zero interest but may need to speak with her at greater length to verify that fact.
My amatuer analysis:
She is asking about 10K too much for the property given the generally run down area of town its located in, and the look of the property itself, but should the ‘no interest’ clause be accurate, I don’t have too much problem overpaying to meet the magic figure in her head in exchange for my terms.
Looking for other advice and viewpoints.
Re: Duplex Opportunity - Posted by phil fernandez
Posted by phil fernandez on July 01, 2008 at 05:38:39:
Borderline area of town can mean borderline type of tenants. Be careful here.
Also get a home inspection on this duplex. It’s old. Don’t go by what the seller tells you.
Sounds like the seller might be motivated. Test her motivation with an initial low ball offer.
No Thrills on this one - Posted by Jimmy
Posted by Jimmy on July 01, 2008 at 03:09:39:
gross annual rents are 14.4% of asking price. in my market, this would be the kind of asking price I would expect for a new duplex (and I wouldn’t buy the new one, either).
this prop is 98 years old. I’m gonna assume it was re-wired at some point, and you have circuit breaker panels. and I will assume it has been re-plumbed (new fresh water lines, sewer lines). if so, the effective age is younger than 98. but the bones of this dog are old, old, old. you should expect an expense load to run you 55-60% of gross rents (taxes, insurance, vacancy, repairs, maintenance—everything except debt service and owner-paid utes). 40% is the norm, but you will have more repairs and maintenance with this one.
here’s my approach. buy this same property in bad condition for $12,000. pump in $25,000 to bring it back to life. now your annual gross rent is 29% of your investment, and you have a great oppty for positive cash flow.