OfflineI just found a two unit rental that I am contemplating as an Owner Finance, but need some input as this will be my first one. I dont have the $$ to negotiate a purch price, so I am thinking about presenting an Owner Finance option. They are motivated to sell as a family member (who used to occupy passed away) and now they just want to get rid of it. Here are the details:
For sale for $134.5K, assessed by town at $143. Already had it up with a realtor since February. The agency tried to sell it for the assessed value with no committments. It is basically a two family rental. Each level is exactly the same as the other. 2bd/1bth. Kitchen and all new appliances. Two nice porches on the front and back of the house with lots of light. Well kept and in good codition.Since its already being offered $9K below assessed town value, there would be instant equity. My first question is: Should I still try to get a discount on the property if they are willing to do owner financing? Is that like double dipping? Second question: Is it worth while to try to get HML for this or can that work with Rental units. I think I could get $900 for rent based on Rentometer. My final question is: For those of you with Rentals, what other expenses are typical of a rental property? I am thinking Mortgage, Taxes, Ins, Plowing, Oil for winter (two seperate tanks that she quoted out at $500 for the year for each one) Electic and Water. There are some solar panels on the roof that offset the cost to the water heater. She showed me a bill and it was $80. Obviously I would pay the mortgage out of the rents but I am trying to figure a monthly mortgage figure with all the above factors to see if it can cash flow. Any ideas from anyone who has done Owner Financing?
Thanks!
-Marc
Owner Financing on FSBO Rental Unit
Posted on: Sun, 07/25/2010 - 13:02
Owner Financing on FSBO Rental Unit
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- by msully1090
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Is not what you need. You need to pull true comps in the area, Until you do that you have no ideal what its worth. The best way is to get with a realtor and see what has sold in the last 90 days that is compatible to what you are looking at.
Randy
www.adeptpropertiesllc.com
Randy is right, you must get comps in the area, assessed value from from the town does not = instant equity.
Yes you are paying mortgage, taxes & insurance for sure; plus maintenance & repairs. But since you have 2 separate oil tanks, have the tenants pay for their own heat, this way it doesn't come out of your profit. Please keep in mind (coming from an Ex-oil company owner) tenants will keep the thermostat turned way up if they aren't paying for the fuel, since they control their unit. And with the extremely high cost of #2 heating oil, those bills can get run up into thousands of dollars easily.
I would definitely try owner financing with a lower purchase price(after you comp it), but offer a little higher interest rate for them, 6%,7% or even more, compare the rate they'll get in the bank, like in a CD or money market fund. Then try to get a 5 yr term (amortization for 30 yr. to keep your payments low) with a balloon due in full at the end of 5 yrs. By then you'll have equity & can re-fi, & probably at a better rate.