OfflineI'm considering buying 3 duplexes with two other partners. The three of us are all good friends. The property is selling for 150,000 and one person is giving the his 50,000 as the down payment. Me and the other guy are going to finance the other 100,000. All six units are already rented out and the property generates 2200 a month. that's plenty to cover our costs and still pocket money.
Me and the guy financing the 100,000 are considering doing a home-equity loan shortly after to pay off our cars. We will still make around 400 a month profit between me and him. The third guy that gave the cash doesn't want or need any of the home equity loan so he doesn't care about that...just as long as he gets his 1/3 of the 2200. We'll be paying off our cars and pretty much be debt-free and pocketing about 200 a month. Think this a good idea for a first investment? Kinda sounds to good to be true.
All questions are good. I'm glad you asked it.
On the surface it does look good. But your numbers are not complete. Is there any deferred maintenance that will need to be done soon? Make absolute certain you pay for an inspection first unless you are contractors and know how to spot bad wiring or a furnace that may need to be replaced soon. How is the roof? What are the property taxes, insurance? Who will manage the property? If you have someone else do it, expect to pay 10% of your gross rents. What is the percentage of vacancies the current landlord has had and consider if the current economy will cause it to be higher? You should have cash in reserve for the unexpected. Many people loose their investment property because they didn't have a cash reserve.
I'm not saying this is not a good deal. I'm just saying you have more homework before you will know if it is. Knowledge is very important. If after you get the final tally and this one is not for you, do not be discouraged. You will have gained knowledge to take with you to the next deal that will be THE DEAL.
If you wish, post your figures here and the pros will be happy to give you their opinion or give you the benefit of their experience.
"Faith is taking the first step even when you can't see the whole staircase."
~ Martin Luther King, Jr. (1929-1968)
www.beaconinvestorsgroup.com
The situation on the property is the current owner owns a lot of duplexes in town. They are spread out over a large area, and he's trying to get rid of the ones that aren't near the rest. He's had these particular duplexes filled constantly for the seven years (showed me the leases). As far as managing the property...we'll do it while we're here. We're in the military, so we'll be leaving eventually, but by that time we'll have more money to spend on someone to manage them.
As far as maintenance goes...all three roofs were replaced a year ago when this town was hit with a bad hail storm. The inspector quoted 10,000 in repairs for all 3 duplexes. Property tax is 1247 a year. This is the numbers I'm looking at:
Property Value: 175,000
Purchase Price ~140,000
Down Payment (33% from 1 partner) 40,000 (plus the 10,000 for repairs)
Financing (66% from me and another guy) 100,000
The all units are rented and combine for a total of 2200 a month
2200 split 3 ways is 733.
I will owe 360 a month for the loan including insurance and taxes. Profiting 350 dollars a month which will go into an account for future repairs. Later on...getting a home-equity loan to pay off our car which will allow for money to cover any vacancies and what not. Payment will then be 530 a month including insurance and taxes.
As far as the economy goes...it's a military town, with 10,000 soldiers supposedly coming within the next year. They'll need places to live.
Give it a year before you start adding any further expenses, as you may just hav one small issue after another and then when you and your friend who took out money aren't getting your $200, but $120 or $67 or $25 because you had to cover your ends.
God forbid you can't cover and have to ask the third party to cover you; thats when things get dicey. Hold off with any added expenditures