How to structure/finance this deal - Posted by Casey
Posted by Casey on August 19, 2005 at 15:31:09:
The property is a triplex with the top and bottom split. The top of the home is a 3 bed 1 bath and the bottom is split between (2) 1-bedroom apartments. The seller currently lives in the top ½ of the property (3bed portion). The owner has not rented the bottom apartments out in the last two years, but prior to that the owner had one rented for $425 and the other for $475. I anticipate that the 3-bedroom portion of the home would rent for $650.
Total potential monthly gross income = $1550/mon.
I am not sure what the monthly expenses would be and vacancy. I would assume that it would be about $400-$500 per month.
Repairs needed are $2500 for bathrooms.
Using an income approach for valuation and a cap rate of 10% that would make the property worth approximately $132,000.
The city has the property assessed at $120,000.
The owner is facing bankruptcy, and just wants to have enough money to be able to put some money down on a new place for his family. They are $1800.00 behind on payments. They owe $66,000 on two mortgages. The owner is not interested in a subject-to scenario.
The lowest I could get the property for is $80,000. I do not want to keep it long-term, I would either want to sell my interest and have someone else close, perform a double closing, or take possession and get the property rented ASAP and then sell.
My questions are:
Should I go ahead and enter into contract to purchase with contingencies on an appraisal (min. $XXX) and financing?
What is the best way to finance this so that I can close as soon as possible? I keep seeing 100% financing for NOO properties. Is this the sort of scenario that these companies are looking for when they will go 100%?
Which is the best way to value a triplex, the income approach or the assessed value?
Any insight is much appreciated