Should I Buy This One? - Posted by Jim_NC


#1

Posted by Redline on December 17, 1998 at 14:15:29:

Not only “you can’t rent” but also … watch for something like “you can only rent the condo once per year.” So, if your tenant breaks the lease in February - you’re outta luck for 11 months! Good luck suing the tenant.

The point is - they can put in there ANYTHING their little hearts desire so beware!

Good luck,
RL


#2

Should I Buy This One? - Posted by Jim_NC

Posted by Jim_NC on December 16, 1998 at 17:10:48:

Hey everyone! I have ran accross what I think is a good deal but I want your all’s expert opinion.

I found a lakefront condo here that the owner is willing to finance. I don’t have to pay a dime down!

Here are the figures:

Purchase Price: $185,000 (Appraised for $200,000)

Zero Down

30 yr at 7 3/8 interest rate.

Pmts are going to be 1178/mo plus $135 assoc fee.

I will be able to rent this place out for $1500-$1600/mo.

I am thinking this is a good deal but I have not “bought” any properties yet. All my properties are l/o.

Should I set this up in a land trust?

Any suggestions or comments will be greatly appreciated as usual!


#3

Re: Should I Buy This One? - Posted by John Katitus

Posted by John Katitus on December 18, 1998 at 02:42:34:

It sounds like a suspiciously easy deal to me. Not that I wouldn’t do it, but I would want to know the seller’s motivation first.

Is there a good supply of tenant’s close? Is there work nearby or is it a vacation area? Some vacation areas are seasonal and close down. Do you live in the area so you can manage it? Did you see an actual appraisal for 200K or is that somebody’s listing suggestion?

My opinion is that if you know the area and have a plan and all the answers to all the questions your post elicits are positive, consider it strongly. Be careful, though. $1400 per month could quickly empty your savings account.


#4

Re: Should I Buy This One? - Posted by Bud Branstetter

Posted by Bud Branstetter on December 16, 1998 at 22:30:50:

Land Trust-Yes, General principle for an investor plus all the other good reasons.

The other piece of advice is to have a clause that they can not come back against you personally only against the property.

You are not buying any equity. You know what they say about you make your profit going in. The interest rate is nothing great. Before you go down in flames do not close until you have a tenant. For an extra hundred a month give them the option to buy owner financed for for $195,000.


#5

Re: Should I Buy This One? - Posted by Dan W. (NY)

Posted by Dan W. (NY) on December 16, 1998 at 21:00:15:

I thought everyone else’s advice was very good.

However I’ve got one additional bit of advice, In my experience (and I’ve learned the hard way) never buy an investment property on a 30 yr. mortage. It just takes too long to build up any equity. My recommendation is that an investment property should at least break even on a 15 yr mortage. That way you are guaranteed of equity build up if prices should stagnate, and you are somewhat protected if prices should fall.


#6

Re: Should I Buy This One? - Posted by Russ Sims

Posted by Russ Sims on December 16, 1998 at 18:20:02:

I guess the big question is, does that monthly payment cover taxes? I don’t know how condos work as far as taxes go (who pays 'em?). In any case if you take your low rent figure of $1500 a month and subtract your mortgage and assoc. dues, you have $187 left. That’s a pretty slim margin to cover maintenance, taxes(if applicable) vacancy,management, and insurance. It seems at best you’ve got a break even cash flow. Do you really want to spend your time and resources on something you’re breaking even on? The same time might be better spent on something that guarantees you a strong positive cash flow…Just playing devils advocate.
Russ


#7

Re: Should I Buy This One? - Posted by Jimbob

Posted by Jimbob on December 16, 1998 at 18:16:17:

Jim,

Sounds like an OK deal, check into a few things first. Make sure the taxes and insurance are included in the monthly payments you mentioned. Check with the condo association to see if there are any existing or upcoming special assessments against the condos, special assessments can wipe you out if you’re not careful, such as new plumbing and paint jobs for all the condos and each owner has to help pay for it.

One key thing to ask the association and it may sound crazy to some people is “if you owned a condo there, can you rent it out”? Believe it not there could be a clause in the CC&R’s (Conditions, Covenenants and Restrictions) that stipulate no rental properties, owner occupied only.
Ask the association what percentage of the condos are rentals versus owner occupied, if the rental percentage is above 20% or so, it will be very hard for you to sell to a conventional buyer down the road.

Also as the association when the last time was that they raised the monthly dues, and if they anticipate raising them anytime soon.

Thats a few of the major things to check on.

Jimbob