New & Need Help Quick!

Eddie,

So you are wanting to lease/purchase a property for more then 20% of its value? You say market vaule is $110,000, lets shoot high and say it needs all of the $8k in repairs, so if you get it for $102,000 and put the $8k into it, your at FMV(retail). But this owner wants another $15,000 on top of that? Does the 1bedroom 1 bath come with it at this price? I'm kinda new to this but I can't imagine this would be considered a good deal. Being that most say they want properties for 65% of FMV. Are you focusing on commercial properties? Do you have someone ready to jump in and lease it? What $ are they going to put down and what monthly payment will they be making?

considering the market situation. It's a buyers market. Think twice before you sign anything with the owner. Blessings to all. LA

HEllo:

This is my first deal and the Offer was accepted. The Seller is sending me the Contract to be signed. I want to do a Simultaneous Close within 10 days. I have a CashBuyer that I want to do the Assignment . Need help and wording on the Contract.

K. Ching

It needs to be at least 70% of the Fair Market value minus the repair costs to even be worth your while. I would pass on this one. The seller is not motivated at all.

No smart cash buyer will buy that property unless he cann go to the bank and refi to pull all of his cash back out and have cashflow from the rent. If FMV is $110 then you need to be at at least $63,500 (65% -repair) and assign it to your cash buyer for 70%-repair. You still have a lot to learn grasshopper!

What do you plan on doing with this property?

It sounds like to me like you're planning on paying Fair Market Value (or more) on a gamble that something may change in the next 3-5 years.

What makes this property a commercial property? It sounds like it to me that you have 2 houses in between 2 other businesses with concrete between the 2 houses.

If the rents cannot support the mortgage (especially without appreciation expected), then like the others have said, it doesn't look like a good deal.

If a friend were to approach you with this potential transaction, what would you tell them?

If you can only get $400 per month per house, that's $800 per month that you would net. $800 (rents) - $775 (note to seller) = $25 per month that would go to you to pay for all repairs, property taxes, insurance, etc. This sounds like a money sink to me.

Let us know if we're missing any other details.

The only upsides that I could see with this is:
1) Market rents are actually much higher than $400 (need twice that or so per unit)
2) If you had an end buyer that was going to tear down the houses and redevelop it in a commercial way.

a 15 car used car lot with 2 residential rental units on it???

if the numbers don't add up...walk away....

Lesson 1: You make your profit when you BUY, not when you SELL.

wishing you success,

Valerie

for an impersonal investment, this is probably a losing proposition. However, if this property is for a business that you own and the location adds value to your business model, then you have to factor in the increased profits from your business to determine its value. However, I agree with other comments that points out that this owner is not motivated enough to sell. Most likely, he senses your fervor to buy this property and is capitalizing on that fact.

Dont sign the contact, walk then Run........Run..NO Deal here.

Man, thank for taking time to respond. I feel like I'm out on an island with this thing. I have post poned my meeting with owner since I have got 11 responses from you guys - My Champs! Here is a clarification of the info that should take the decision over the top. The property is zoned commercial and the last tennant that move out April 1 put $10K in new plumbing, new cabinets, etc. over the 14 months that he operated a Cell Phone Business out of the main house. The 1BR\1BA guest house does come with the deal and is rented for only $250, which is $150 below market rent. The house\office I intend on living in and starting some kind of business like Climate Control Storage, the property will accomodate an additional 4100 sq ft of storage or living space. Which there is a shortage of in that area and would bring in about $2000 per month with only 50% space rented. So with the Apartment & Storage I would be looking at about $2400\month in rental income ($400 Apt.+ $2000 Storage), with a $775\month lease purchase payment, leaving $1225. Also, $150 per month would be going toward to purchase price every month for 36 months ($5400 total)and I would be living rent free. Additionally, there is a Lowes Shopping Center opening within the next 12 months about a mile down the road and new paper plant with 3000 new jobs opening next year about 3 miles down the road. Which could aid the appreiciation????? (These are the positives, at least the ones I see)

Question - Value Proposition: I guess I'm wondering what is the value of the owner allowing a 36 month lease purchase and $150 of it going towards the purchase price? Also, he retains property insurance, taxes, termite control during this time. Additionally during the 36 month lease purchase period I can assign the lease, either rent the entire property out or I can sell the property. Even though there is a good chance of some appreciation, is it still worth it if there is none over the next 3 years? Or, am looking too short term? Last, I will be paying to live somewhere. If I live here I can immediatley live for $375 per mo.(775.00 - $400 = $375). And if I add 400 sq ft of additional apartment or storage space I can live free, except for utility & the occasional repair. Which can easily be covered by adding more rental space.

Is it worth it as I've mentioned above? Is it worth it if I go into knowing I will have a better deal with a 10 year plan? Again, thank you all for your input. If any of you have any more ideas considering this new info I would really appreciate it. I'm staying in an extended stay hotel, with everything in storage as I try to decide on this. Unless I get a nugget of positive confirmation from you guys this time, I guess I'm going to move on. Find a "normal" place to live. God bless & thank you all!

Eddie

It depends on how you predict the economy in the future. I just sold 2 properties for 13k to a seasoned cash investor/landlord. The property is rented for 750/month and he will have an ROI in 2 1/2 years just from the rent alone. So from this example, you will see how a seasoned REI/Landlord think. Blessings to all. LA

run don;t walk. just my 2 cents, I woulden't touch it

Randy

I wouldn't do it. It's not a good enough deal, and it involves too much cash and not enough equity.

Run !

If you had your heart set on this property, you should double check with your city to see if you would even be allowed to have a storage rental place there.

Another possible expense, if you had your storage place, would you be required to have commercial lighting around the rentals? Would you or your other tenant be ok with 300 watt lights outside the windows?

Also, I would consider appreciation as a perk or a bonus. I would consider no appreciation while running the numbers just in case it doesn't happen.

It does seem a little strange to me that the owner would still be paying the taxes and other bills. How would the owner make any money off of this transaction?

Who would be pocketing the rent from the 1 br house?
$775 - $250 = $525 per month for the owner to pay all expenses? How much are the property taxes for the property?