OfflineHey DG family,
Here's the deal:
I have had my eye on this house for about 5 months now... I decided to not pursue it again until now (fall) because my plan is to rent it to college students, and from what I've seen, students aren't looking to rent a house for the following school year until September/October/November.
The original listing price was $99,900. They've dropped it to $79,900. The house is in probate and the heirs live out of state!
Apparently they are allowing some of their extended family to live there, however when I went to go look at the house 4 months back with the listing agent, we weren't able to get in the house because it was locked and one of the family members that lived there had a heart attack and couldn't return to open it for us since they were at the hospital.
Its a 5 bed SFH that is eligible for a rental permit, however I will need to tear off the attached single spot garage in order for it to pass the city's parking requirement for rentals (2 spots off street).
Rents for off-campus housing range anywhere from $275 to $400 per month per bedroom. Its only 2 blocks from campus. Rentals 3 blocks from campus are charging $350/month.
The listing agent had blown us off more than once when we wanted to look at the property. The only reason this bugs me (besides the unprofessional aspect) is that I would rather just go through the listing agent than a buying agent because I could most likely negotiate a lower commission since he would be getting the entire amount instead of splitting it in half with a buying agent. However because of the way he has treated me, I really don't want to have him as my agent on this property if I can help it. He was friendly when we went with him to the property, but flaking on us the first 2 times we tried to look put a bad taste in my mouth.
My questions are as follows:
1. Should I go with a buying agent? Or should I try again with him, since the price has been reduced and they aren't getting any offers (far as I can tell)?
2. How could I go about seller financing this property? Does the title company take care of it? Will it report on my personal credit?
3. The home is 115 years old. What issues should I be looking for in such an old home? Did they have asbestos back then?
4. Any advice about renting to college students? What are the legalities of renting by the room? Do I need to have separately keyed locks on each bedroom?
5. How much should I be paying per month to have the lawn mowed and the snow removed from the driveway in the winter?
6. Are there any issues with having a construction company coming to the property and giving me a quote for the removal of the garage and the re-siding of that side of the house before I own the property? i.e. trepassing, etc? Any idea what it should cost?
7. Am I correct in thinking that a real estate agent legally has to present my offer, no matter how low it is?
The reason I ask is I think I can get a killer price on this property with killer terms since the heirs live out of state and will have to winterize the home soon if no one is living there.
8. Am I forgetting any expenses for renting a property besides mortgage, insurance, property taxes, lawn care/snow removal, reserve for unseen expenses, and management fees? (tenants would pay utilities)
9. How could I go about the commission aspect with real estate agents when doing seller financing?
10. Can you guys think of anything else I forgot to mention that I should look out for?
Sorry for the laundry list, but I am serious about buying this property and don't want to leave any stone unturned.
Thanks in advance for your help!
1. Should I go with a buying agent? Or should I try again with him, since the price has been reduced and they aren't getting any offers (far as I can tell)?
2. How could I go about seller financing this property? Does the title company take care of it? Will it report on my personal credit?
3. The home is 115 years old. What issues should I be looking for in such an old home? Did they have asbestos back then?
4. Any advice about renting to college students? What are the legalities of renting by the room? Do I need to have separately keyed locks on each bedroom?
5. How much should I be paying per month to have the lawn mowed and the snow removed from the driveway in the winter?
6. Are there any issues with having a construction company coming to the property and giving me a quote for the removal of the garage and the re-siding of that side of the house before I own the property? i.e. trepassing, etc? Any idea what it should cost?
7. Am I correct in thinking that a real estate agent legally has to present my offer, no matter how low it is?
The reason I ask is I think I can get a killer price on this property with killer terms since the heirs live out of state and will have to winterize the home soon if no one is living there.
8. Am I forgetting any expenses for renting a property besides mortgage, insurance, property taxes, lawn care/snow removal, reserve for unseen expenses, and management fees? (tenants would pay utilities)
9. How could I go about the commission aspect with real estate agents when doing seller financing?
10. Can you guys think of anything else I forgot to mention that I should look out for?
Sorry for the laundry list, but I am serious about buying this property and don't want to leave any stone unturned.
Thanks in advance for your help!
You'd probably do better working with your own agent, or sending your offer directly to the seller. The seller still would have to pay the full commission according to the terms of the listing agreement either way. If you opt for the prior, then you should structure any deal with creative financing so that there's at least enough cash in the deal to cover the commission and closing costs. If you opt for the latter, then you should structure any deal with creative financing so that there's at least enough cash in the deal to cover the 1/2 of the commission and closing costs, and get the agent to take a note with the seller for the remainder of the commission.
You should have your title company or a real-estate attorney to create the note with your terms.
College rentals is a great niche; I also like this niche. You should check out some of the REI clubs in the area where that property is to network with some of the other investors who have college rentals there. You might even want to contact the office responsible for handling student housing to find out if they have any sample or template lease agreements. (You might also want to have an attorney who specializes in tenant law to review the lease.) You might also want to check out some of Doug Fath's materials on this. He's got a great lease with some nice landlord-friendly clauses.
You should get at least 3 contractors to examine the interior and exterior of the property, and give you quote for the work. The contractors will raise any asbestos issues if applicable. You needn't trespass; rather, you should be able to coordinate with the selling party to schedule the inspections.
Contact several property management companies that manage some of the student rentals to get some estimates for the expenses, and compare the results.
The only issue that I'm somewhat concerned about is management... there is only one property management company in the town where the property is located... its a town of 30,000 in the middle of nowhere, with a student population of about 9,000.
The one property management company I did find (and spoke to) seemed to be run by a nice guy, but they were still filing which tenants had paid their rent using a small paper filer on a spinner (I have no idea what its call its so old fashioned!), so I'm a little concerned about their management strategy if they are still not using a computer-based program to manage tenants and rents...
All I know is if I cannot find a good management company nearby, I will not buy this property. I'm not in this business to have another job... I'm here to leverage the time and talent of others so I can free up more time for myself!
As much as I would like to buy it myself, I suppose assigning it to another investor would be what I like to call a "good problem".
What are your guys' thoughts on this?
Although I suspect more than 1 property management company exists there, you could work around that issue by doing a deal with creative financing. You could work with a servicing company to process the payments. The property maintenance will be your tenant/buyer's responsibility.
Drop the no can due RE agent and find one to work with you. Also how close are you to the prop? If you are close enough why do you want a prop manager? They take up to 10% of the gross rents and if you are just starting out why throw cash flow away. Also if this is going the seller finance route, you might want to talk with your agent about the comiss. You might have to throw him or her some cash so they are not left out of the deal. Since agents are not making any money at all out there due to the mortgage market not lending, they might entertain a deal with lesser comiss. As far as prop maint. goes, look for a handyman who can due just about everything but doesn't charge the big buck. Lawn and snowplowing? There are a ton out there. Hope this helps. Student housing is a great money-maker but it does have it's headaches...Jan
Upon calling the city manager and getting a copy of the city rental code, I found out that not only would I need to tear off the one car garage, I would also need to put in a paved parking area all the way into the backyard, since the 2 required offstreet parking spaces can't be stacked. So I will need to get a quote on that.
Anyone familiar with the cost of putting in a paved parking area?