Tired Landlord, pls help me eval. this deal (long) - Posted by Sandy FL

import · May 26, 1999, 7:26am

Posted by Bill Taylor on May 26, 1999 at 09:10:45:

sandy sounds like a good deal if you can take over the mortgage and clear it out of his name. The thing that always worries me in this situation is what else can attach to this prop besides what he is telling you in the way of his other debts which I’m sure he’s not paying either. Probably good question to ask someone o nthis boad as to what can follow the property. Sounds like a nice deal based on cash flow though. And maybe you can sell to that guy that bought that prop down the street before he knows what hit him the one that bought that prop for 380000.

import · May 26, 1999, 7:26am

Posted by Sandy FL on May 26, 1999 at 07:26:41:

Tired landlord, also behind in payments, and has a family emergency overseas and needs cash now. Willing to take 10k (maybe even 5k, he adds) and sign over the deeds on his 5 plex and his rental house.

Here is the data as I understand it so far. I am on my way to go see the properties and research the titles. 5plex (7/5), rents are 2915 a month, fully rented, good condition. Loan balance is about 164k, payments are 1400/mo P&I. Comparable sale for another 5 plex (5/5) down the street recently sold for 380k. (Somebody WAY overpaid there)

House, rented section 8 for 800/month. Loan bal approx 60k, comps in the range of 90-100k. Both structures in good condition, as far as I know (so far).

I was trying to evaluate this as a 6 plex for ease of figuring value. The problem is the guy says he is 10k behind in payments, has 8k in taxes outstanding, and the bank has told him to pay the 10k in arrears by the end of the month (May 31) “or else”. (foreclosure, I would imagine)
So anyway, using a very conservative 40% for maintenance and vacancy, (Gross rents $44580 - 17832) = 26748 NOI. Loan balances (164k and 60k) + 10k payments in arrears + 8k taxes outstanding + 5k cash to the guy = 247K. 26748 NOI div by 247000 = 11 CAP.

If you are with me so far, I invite your comments.

Also, on subject to deals, (give the guy 5k and he signs over the deeds and security deposits, etc)… of course the delinq payments would have to be made up at once, but would I have time with the tax liens? I thought delnquent taxes are to be paid at the time of transfer? (even with subject to’s?)

Thanks for shedding light for me. What a week for my favorite attorney to be out of town!

SandyFL

import · May 26, 1999, 12:48pm

Re: Tired Landlord, - Posted by JPiper

Posted by JPiper on May 26, 1999 at 12:48:02:

Sandy:

I wouldn’t be analyzing these properties in this particular manner. One property is a 5 unit apartment building. The other property is a single family home. My view is that they should be analyzed separately. Otherwise, you’re mixing apples with oranges. An SFR is not analyzed with a cap rate.

Numbers that I would want to know that aren’t provided are the breakdown of how far behind on which properties in terms of both taxes and mortgage payments. I’d also want to know the details of the loan on the SFR?type of mortgage, year of origination, payments.

Other factors here revolve around what your exit plan is for the properties. Just so that you know, a “subject to” assumption on a 5-unit building is NOT the same as one on 4 units and under. Garn-St Germain specifically applies to UNDER 5 units. Therefore deeding to a trust as an example on a property of this type triggers the due on sale clause. Further, I would want to know details of the leases on the 5 unit, details regarding tenants and deposits, and details concerning the Sec8 rental of the SFR. The existence of a Sec8 tenant may imply the need to hold the property until the expiration of that lease?.unless you can sell the property to a landlord type.

You can take title subject to existing delinquent taxes?I’ve done it many times. (Unless there is some weird rule in Florida). I would tie the properties up?then check title and some of the other due diligence mentioned above regarding leases, etc. These appear to be good deals IF your market values are right, and depending on the condition of the property and all the other normal factors.

By the way?if a seller told me he would take $10K?.maybe even $5K?.I’d probably offer $3K as my opening shot. One other factor?.I don’t know how deposits work in Florida?.but if the landlord has possession of them, he may already have spent them?.they may not be able to be transferred.

JPiper

import · May 26, 1999, 8:51am

cash on cash return? - Posted by rayrick

Posted by rayrick on May 26, 1999 at 08:51:08:

You know I’m no expert Sandy, but I’ve heard it’s a good thing to figure out your cash on cash return. You’re essentially putting about 10% down on this place. You can go out and get new loans pretty easily with that kind of money, so the question is is your total price of 247K a great deal for your area, will your income after debt service constitute a nice return on your cash investment and can you afford to tie up 23K for a while.

How old are the loans? Will you be building up equity in big handfuls?

Just a few random thoughts from a newbie.

-Ray

import · May 26, 1999, 12:56pm

Re: Tired Landlord, - Posted by David Alexander

Posted by David Alexander on May 26, 1999 at 12:56:05:

But, you can sure tell him your going to deduct the deposits from what he is getting from you, that would make less cash out of your pocket.

Jim, Thanks for the Info on the Garn St. Germain.
Guess, I just learned my new thing for the day.

David Alexander