Offer or Run?

This sounds like it could be a good deal if you get the property for the right terms and price. In some areas the assessed values can be much lower than fair market value. Try to find out how your area reflects asessed value to FMV.

One word of caution is make sure the current landlord does not give the current tenants a 1 to 2 year lease extension. Make sure you are able to review the tenants and rents. If the property cash flows itself, it may be worth a closer look. Other things to consider in the acquisition is the age of the roof, furnace and central air units, etc. Also check with the town or assessor to verify how many units the bulding is truly zoned for. When calculatin expenses, see what the landlord pays such as common electric, water, etc. If you have to furnish heat or utilties take a real close look at the costs and factor in an increase in cost for this year. In some areas towns are cracking down on buildings that have been "cut-up" into multiple units.

If you get great terms you can offer a better price. Good luck with this potential deal and keep us posted. Believe and Achieve! - Joe

I always appreciate your advise! You mentioned not to let the landlord extend the leases, wouldn't it be a good idea to have renters locked at least for a year? I understand I wouldn't be able to raise rent, I don't think I will be able to anyways, they did alot of rehab, so I don't see where I could do some and then raise the rent. As far as the roof & furnace, all the rehab was done since 05 and they were included along with alot of other things. When I checked the county records, it does state that it is a 4 unit lot so I'm ok there. I'm still waiting on an update on expenses, since the paperwork he showed me is from 07. I will play with the calculator to figure how some numbers come up.

Thanks again for your advise!!
Mary

Good luck Mary, I hope things work out for you.

Brian

Mary also find out if she owns the house free and clear of all mortgage, and if that is so, then submit a offer at 50% of the listing price and see what happens. Hope everything works out. God Bless.

Sandra

If the house has been on the market for a long time, definitely low-ball. It will probably pay to keep the renters in the house, at least for the first few months.

Yuri

It sounds like your doing a great job checking and verifying the figures. you may want to double check the large expenses such as any utilities you would furnish, proeprty taxes and insurance. The expenses the current landlord claims on his Schedule E of his tax return would be complete. If you see just a list they could be light of a few expenses.

In regards to the rents, if they are at the current market rate great. You just don't want to get locked in with rents well below current market. Also, if you purchase the building, you may want to ensure you have the current tenant's applications with their person information if you run into a problem such as late rent. You may want to review all leases to verify security deposits and to make sure there are no provisions for say a "free" last month's rent. Good luck on this potential deal. Believe and Achieve! - Joe

This is all great advise and I appreciate it alot. The realtor hasn't followed up yet with updated expenses, which I would really like to see considering the way utilities have gone up in the last couple of years! I do have one question, both Joe and SanBern have mentioned to find out if there is a mortgage, I don't think there is since she bought the property in 02 for 35K, but I would like to know how you can find that out (I must have missed that part), also do you think the realtor can find out the tennents payment history or is that going over the line? I would like to make sure they are good tennents if I can.

Thanks again guys, your the best!
Mary

To find out if there is a mortgage you can try the following, contact the local county recorder's office and see if you can inquire about any liens on the property. A mortgage should be recorded as a lien against the property.

They should proivide the information, but you may have to visit in person to get a copy and they could charge you a fee, but the information may help you with this potential deal. I hope this helps. Good luck and keep us updated on this potential deal. Believe and Achieve! - Joe

Thanks Joe,

I feel pretty silly now that you say that, I should know that already.
I was thinking of maybe offering something like 75K at 8% for 7 yrs total loan being 98,193 mortgage payment $1150.00 or maybe 95K 0% 7yrs $1131.00 being mortgage payment. Does this look reasonable or am I getting the "better rate offer more" thing all wrong. I was trying to leave approx 700.00-800.00 a month to cover expenses and still have a cash flow.

Thanks again for all your help. Keep you updated.

Mary

A few additional things you may want to consider. First if you are holding the property as a buy and hold to rent out try to calculate your annual expenses such as insurance, property taxes, utilties, mortgage payment of principal and interest. Then try to determine the rent you will receive. Based on this net information each month will provide a better idea for cash flow.

A key is your interest rate and terms including the length of time to pay the loan. The numbers you want to run is the purchase price interest rate and length of mortgage (10, 20 or 30 year). Once you know the figures you can run different scenarios. I hope this helps. Good luck with this potential deal. Believe and Achieve! - Joe

I'll keep that in mind

Mary