My First 4-plex? How To Structure The Offer
I am brand new to real estate investing (reading for about 4 months), but have already bought my first duplex two months ago. I apparantely have a high tolorance for extreme stress, because I'm actively looking for my next investment.
Here is what I found:
New Orleans LA
Not the best neighborhood in the city, but there are renovations going on throughout the area. It's also been designated a historic district. It is on the very edge of a bad neighborhood (ghetto), but is also 3 blocks from St. Charles, which houses multi-million dollar homes. Welcome to New Orleans Shaa.
Property Details:
Asking Price: 129,000
Appraised Value: 139,000
Sellers: Very Motivated - partnership of real estate folks who are dissolving all their assets. They will entertain ALL offers. I just don't know how or what to offer.
Property Condition:
Very large two story double - 2 apartments upstairs - 2 apartments down (not finished!)
Top 2 apartments newly renovated, albeit cheaply. They are both 2 bedroom apartments.
The bottom two apartments need to be finished. Wiring is in place, and studs and structual work done, Needs finish work and appliances, possibly plumbing work?
So it's not yet a 4 plex.
I'm considering section 8 rents (a little scared of this) and will need to find a way to pay for finishing off the bottom 2 units to make everything rentable.
Section 8 will allow $725 for each of the top apartments, Not sure about the one bedrooms, but was told $500 at least, which gives a monthly income of over 2000 per month. So positive cash flow lurks somewhere within this deal.
My Goal:
Buy and hold and get positive cash flow.
My concerns:
Dealing with low income renters, paying for the renovations and really even coming up with a strategy for the offer.
I was told to bring any offer in to start the negotiations and am now stuck.
My financial Situation:
Credit - was 640 two months ago, but started dropping as I was trying to get the mortgage for my current duplex, don't know why, but its now 580?
Cash - Just bought a duplex, so none left to really speak of
Employment - Self Employed with a software company. Make enough money to pay all my bills, but it's tight sometimes to say the least.
Which to me means, conventional financing is over with, its now owner financing and partnerships.
Any advice on how I should look at this and put together a deal would be greatly appreciated.
I can give you some experience about section -8 tenants. List the unit for rent and scheduling an open house on your off days . List your cell number vs home and the reason for this is it will never stop ringing and you need privacy. Once you do your open house have a simple application with the names of individuals who will reside in unit, copy of proof of income, previous landlord,ss#, and at the bottom of form charge them a $35.00 application fee.
The reason you are doing the open house is that you get to screen a large amount of tenants at one given time. I had one tenant who worked and one who didn't.
If possible try to choose a tenant who has something to do with there time during the day because if you don't they will have excessive company, constant complaining hanging out, etc.
I also, type up an addendum to lease agreement with things such as:
Anyone living in your home that is not on the lease agreement will terminate the lease. Charge 5% of the rent in late fee.
Donot pour grease, feminine products down drain. Owner will be responsible for repairs and tenant will be held responsible for damages that are caused, etc.
I advertised for a tenant through cha website, newspaper, word of mouth while I was renovating the apartment tenants can by got tenant involved, let them pick out color of carpet .
They wanted to be involved so they came by and varnished all the wood. Once the tenant paperwork is filled out it takes about 2 weeks for the inspection to come by if the child is under 10 years of age they are looking for peeling paint, holes, windows sills for lead. I always dressed like I'm tired because for some odd reason it has worked to my success.
The inspectors will look at you in a total different way if they think you have a lot of something and find little things to delay passing the unit for inspection. My unit failed 3 items but he passed anyway and it was probably due to the fact that I had lots of dried glue on my hands, paint on all my clothes looked very tired and put a great deal of effort in the unit.
I stay on top of my repairs because when inspection time come around, I only have around 5 items to complete and they can be done in one day.
The process will take about 30 days to receive payment, but it comes like clockwork every month.
So start advertising.
As for your credit score what I found out is that the more inquiries credit score drops around a 1/5 of a point and with a 680 score the 3 credit bureaus are selling your information to 3rd parties vendors. To stop the solicitation call them and tell them you wish to opt out.
Privacy www.guard.com is a service I use for $79.00 a year tells you everything why scores are low and high in paragraph form, alerts you by e-mail if anyone is inquiring into your account , gives you your score, how much credit you are using, what lenders look for. You can go there 24/7 without it being an inquiry. Excellent service.
T