High rental $ on state group home - Posted by Tim (CT)
Posted by Tim (CT) on February 21, 2002 at 17:46:33:
I have an opportunity to pick up a property that is currently being rented by the state. The state has put 3 mentally retarded ladies in this home to live. They have 24 hr. supervision by someone from the state (3 people at 8 hour shifts). The property started off as a typical raised ranch (3 bed. 1.5 bath) and has since been re-done by the current owners to have a 3-car garage, an in-law suite, a total of 4 bedrooms and 3.5 baths all on 2/3 acre of land along with a few other nice things. Total sq. footage is about 3500 (big raised ranch!!).
They are getting $2,400/mo for rent (in an area where raised ranches get about $1,300/mo), and the state pays for everything (i.e. - snow removal, mowing the lawn, city water, etc.). The only thing the current owners have to pay for is their mortgage payment any repairs that need done where the tenants did not cause the damage (i.e. roof, electrical, furnace, etc.). If the tenant sticks something down the toilet and it floods and damage occurs, the state picks up the tab (actual example).
The owners live 500 miles away and have been looking to sell it for at least 9 or 10 months (probably longer but that’s when I came into the picture). Just yesterday, I pursued the property vs. just looking at it from the sidelines. They started off with an asking price of $199k and through very little negotiating I’ve gotten them down to 180k. They’re trying to tell me there’s another person that has offered just under 180k. I don’t believe this.
My line in the sand is 172,500. I could go a little higher than that (175k) but I’m going to stick to my line. With that number, this property gives me about $700/mo positive cash flow (and, maybe even a little bit more - I’m checking out a couple of figures I have). I think that’s pretty decent. Especially, if I know the tenants are going to take care of the place and I don’t have to do anything (btw, the furnace and roof are both less than 2 yrs. old). My resale value on a 3,500 sq. foot house is easily over 200k and probably pushing 240k. (I will be doing comps on this soon but I know it’s way over the 175k I would be paying).
Sorry, so long-winded, but the question I have is has anybody else picked up a property and rented it out to a state agency such as this one? If so, how has it gone? I’m a little leary about it just because it is the state I’m dealing with and I can’t imagine they would move quickly on anything that would need to be done. But, like a section 8 tenant, I know the check will be there every month. Also, they say that want to have the ability to be able to purchase it 3 or 4 years down the road. This sounds like a L/O deal but I don’t believe any paperwork has been done. If I do get into this deal, I’ll make sure the correct paperwork has been prepared and signed.
My biggest goal for this place is get some extra help in paying back a line of credit I have out (about 37k). With this property and my other one, I’ll be able to pay this off in about 20 months. So, in 3 years time or so when I go to sell, if I can only get 175k or 180k my thoughts are that that’s fine. I’ve still used this property for 3 years to payback a debt that I’ve incurred for all of the properties I have.
Again, sorry so long-winded but I wanted to give some background. Any thoughts or comments would be appreciated.