12-plex How Does This Deal Sound
Had duplex and 2 four-plexs yrs ago now looking at a 12 plex. Asking 380,000 rents are $425 says it is section 8 approved. Roof 4 yrs old, new stoves, dishwashers, etc new siding. Drove by looks nice and clean. Located in Louisiana, Bogalusa, Small older town. Not sure on what taxes and insurance will run etc. but from this little info does this property sound ok? Its located just down the road from a large paper mill that is basically what started the town 80 yrs ago from what I understand.
you need to get existing and pro-forma financial is available and crank the numbers.
Also, see what the sect 8 contract rate for the county is v. the 425 "market" rent.
Got the expenses from the listing agent.
Water 1,440
Electric 960
Insurance 4,400
Trash 1,200
Does that 4,400 sound high for insurance. Not sure what coverage that is but sounds high.
So in a nutshell a 12 plex that has an asking price of 380k and has expenses of 8,000 would this be a good deal?? From my figuring ( beginner) I come up with a huge cash flow of over $2,000 per month! [ Edited by Slidell on Date 06/26/2005 ]
If this is a deal you are working and the numbers are correct, you seem to have found a good one.
Seller carryback is usually a second mortgage, often with a baloon after a short period of time (one to several years). The seller is just another lender. The property is yours (and the mortgage holders of course--including the seller). You can deduct all the interest and costs associated with the property.
What is in it for the seller? A sold property, usually for the price they want and an income stream on the carryback, at or above market rates.
If the seller does a carryback say at a rate of 6% do I usually pay him back monthly for a fixed term with a balloon for the same interest rate or does he make up his own say 8% ???? and make he makes 2% for doing this carryback?
If they agree to a 6% note rate, typically, that 6% of the 2nd would be paid to the current owner. They owner might say "I want 7%".
Every combination of int only, fully amortized, ballon, term of note all is negotiable.
generally, in my offer letter, i put the following verbage. notice this is literally bullet #2...
2. Seller shall finance 10% of the purchase price for Buyer in the form of a second mortgage under the following terms:
a. Three (3) year balloon; based on a 20 year amortization schedule;
b. Interest rate at the same rate as that of the first mortgage;
c. Interest only payments, paid quarterly for the first 12 months.
rarely have i had this become an issue, as its somewhat expected on commercial transactions.
Will see prop this Friday. Does the commercial lender I use generally also do this 2nd carryback mort for seller or does he have to go to his own bank and take it out before the closing? Would seller by on prop title too?
If this deal happens more than likely thats what will have to happen. Or is it better to use equity in my own house? and not have buyer do carryback?
Thanks