Posted by Shenesa on April 14, 2000 at 13:21:13:
Thanks Jim,
The letter to the owner is going out this week.
Again, Thanks
Shenesa
What do the experts think about this one! - Posted by Shenesa
Posted by Shenesa on April 14, 2000 at 11:12:17:
I called on a 4 unit apt and was able to speak with the manager of the building who gave me an earfull on this partcular piece of property. For starters the owner lives out of state and has put little to nothing into the property to modernize it and make it more apealing. The roof needs to be replaced ($8-10k) there was some water damage to the hard wood floors, kitchen has no cabinets, electric needs to be improved, plumbing needs to be updated, painting in all units, windows need to be replaced, outside needs to be painted. I figure around 20-25k will need to be put into this complex to make it more appealing and bring the value up. The units rent for $350-365 a unit(1br apts) with tenants paying own heat. The area according to the manager who also lives in one of the units, stated that the area is basically on the down side. The area is mostly rental and the comps range from 30-50K. The owner want 6k down and a mortgage take over of 30k, taxes are $3500, which is extremely high for this inner city neighborhood(not a war zone). My thoughts are this house will take more to repair than what it is worth. I don’t want to throw the baby out with the bath water so how, if I can, do anything with this. I plan on sending a letter to the owner just to see how motivated he is.
Your opinion is greatly appreciated.
Also I am in the process of driving around the different neighborhoods looking for boarded up buildings I am sending a letter to the owners stating my interests in their property. I would assign the contracts to other investors who may be interested. I want to build up my capital so that I can go on to other REI ventures, such as finding, fixing and selling. What advice can you give me.
Shenesa
Re: What do the experts think about this one! - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on April 14, 2000 at 18:16:42:
If it were known why the seller wants to sell it would be helpful. Now that said it looks to me like this property may be overpriced, the rents don’t justify an investment of much more than 30K, that’s what he owes. He has a tenant manager, this may be a cost item as well. The building needs work. It sounds like it needs a lot of work, and the property is in a declining area. Not a war zone ( read YET). We never know about changes in neighborhoods, do we? Taking all this into consideration the seller may just want out. I would not offer him any money at all and tell him that if he would pay me say, $2,000 in cash at closing that I would be willing to take this problem off of his hands for him. He may take that deal, you will never know if you do not make the offer…ED
Re: Not an expert - Posted by Stacy (AZ)
Posted by Stacy (AZ) on April 14, 2000 at 15:13:29:
Hi Shenesa-
As you know from our prior emails, I’m not an “expert.” But, I will offer my opinion regarding this and the previous deal we discussed.
I think you’re showing some real initiative. You are taking a proactive approach, and getting out there in the streets. I know you will have your first deal very soon.
But, I would suggest that you consider focussing on single, rather than multi-units to flip for your first deal. There are a smaller number of investors interested in buying multi-units than houses or condos. I’m sure there are fewer multi-units available for sale, in general, than houses or condos. I think you need to consider trying for a flip in a marketplace that makes your success as easy as possible.
Just my opinion…I think you’re getting close to that first success story.
Stacy
Re: What do the experts think about this one! - Posted by doug,KY
Posted by doug,KY on April 14, 2000 at 14:29:36:
Diffenently, need to talk to the owner. Here another option. Are the units empty or full? If some of them are empty because of the maintenance, the owner might be motivated. A lease option (taking over the management - he’s probably blaming them anyway) structured where you pay the owner by increasing increments as you get one unit updated and rented. Example, if two of the units are rentable, pay the owner rent for one for certain time frame (one year). Invest the leftover rent into fixing the third unit and then rent it. If You complete the rehab of the third unit quickly, then you’ll have three units producing and paying for one during the first year. Second year, you’ll have three units completed and working on rehabing 4th. But only increasing the owner’s payment one or two hundred dollars more. Complete the rehab on the 4th unit and get it rented. Then the third year, you’ll have all four units rented and producing with a slight bump in payment to the owner. Get the picture. I would try for a five year lease option to get the building completed.
Word of caution, do the numbers game. The idea is to let the rent pay for the renovation. Know exactly what it’s going to cost to fix each apartment. Make a plan and stick to it. Allow room for contingency money. (Murphy’s law) Lastly, your buying the property down the road at today’s price (you have to negoiated this), protect yourself. At the end of the option, the owner has a renovated building and he might want to keep it now especailly if it’s doubled in value. The courses here will give you the guidence needed.
Doug,KY
Re: What do the experts think about this one! - Posted by Jim IL
Posted by Jim IL on April 14, 2000 at 12:36:48:
Shenesa,
Sounds to me like you need to talk to the seller first, before you even think of an offer or game plan.
The numbers you give do not make this an appealing deal to me.
But, if the seller were to give you the deed, for nothing down, and you take the property “subject to” the exisiting financing, then MAYBE this is a deal.
Or,
Perhaps some kind of split funding, or a Land contract for the mortgage balance plus a little.
As long as you can get in, get the repairs done, and sell the place pulling your cash and profit out quickly, then there may be a deal here.
Find out more from the seller and post it here.
Then we can all take a better look at the deal, and tell you if there is one or not.
Good luck,
Jim IL
Re: What do the experts think about this one! - Posted by Shenesa
Posted by Shenesa on April 14, 2000 at 14:59:05:
Hey Doug,
Thanks for the information. To answer your question the units are rented and they rent for $350 a month.
Again,
Thanks