Re: Inc Props vs. Rehabs - Posted by Td
Posted by Td on November 03, 1998 at 08:26:43:
Greetings, Laure, thanks for your response. You’ve confirmed some things I was wondering about, such as who pays the utilities.
I was relying on the “Money Making” article on Creonline, here, called “Crash Course on Commercial Real Estate”. But it seems that one is for much larger properties. I can see some utility factors coming into play for the landlord on something like a 12+ building.
As for 2-6 unit buildings, yes, the tenant should pay for utilities. I certainly had to when I was still renting. It’s a bit of a trick with utilities here in the Hartford, CT area. Many multifamilies offer heat and hot water paid with the rent. And it gets cold up here in the winter, maybe not like in Illinois, but quite chilly, indeed. Still, there’s enough properties that can be had where -everything’s- separate, including water.
Laure, how would you screen a 2-6 unit property? How would you determine whether to view a property based on an ad and the sometimes limited info you can get from the seller and/or realtor over the phone?
I’ve thought that I should know what each unit should rent for; I need to have a very good idea of gross income.
What about vacancy allowance? 2-3 family units? Is 10% a good allowance for this?
How 'bout expenses? If the tenants pay for their utilities, then what would I have to pay for? Water and /or sewer services? Just a rough figure to adjust for expenses, seen and unseen. What would be a good percentage for expenses margin?
Now for the real key…what would a lender be looking for? Mortgage would have to be under 50% gross income, I thought I heard somewhere. What kind of general profile does a bank look for?
Conventionally speaking, I just checked with a national bank in passing. They’ll loan 75% @ 8.9% fixed x 30yrs w/a whopping 25% cash from the buyer. All cash, no seller financing. -YUH!- They must not do too many investor loans.
There are mortgage companies and private investors all over the papers; I’m going to ask some questions of them soon. But just by way of preview, what would a mortgage broker look for in order to approve a loan? If a -very- private lender (few or no questions asked), what kind of percentage would they lend? Would they accept it, if seller would be financing the rest, or some combination of possible arrangements other than my putting down cash?
Yes, many questions.
Of course, I’ll be on the telephone to some lenders. Also some sellers. One property is looking more promising, even figured as I previously did above. If I go see it, I might get to see income and expense reports. I’ll have a better idea of costs then.
Meanwhile, thank you, and everyone else on Creonline. Nice place to come with my morning coffee and learn about this business from you fine people.
I look forward to your advice, and hope to sometime in the reasonable future tell you about a success story that you all helped me achieve.