Mortage Advise Needed
Hi : I am in the process of buying a brick duplex house ,I am supposed to close on it the end of July . I gave them a 5k deposit with the contract its selling for 166k the monthly income from it is about 300 per month after P&I and insurance . Its in one of the best school districts in the area here and i think the property will appreciate pretty well over time . Heres my delema In the meantime I ran into a seller out of state that has a 3 unit brick house .Its right next to a college campus thats spending millions & millions on its campus and area . They offered her 90k for the house a while back . Its been vacant for 6 yrs and she needs to sell it because she is out of state and its hard to take care of it .The house needs about 60k in rennovations to bring it back into good shape its an old building . It has 11 bedrooms over 3 floors that rent as student rentals for 250.00 month Thats 2750.00 a month and i think the house would be worth about 140k ti 155 repaired . I am thinking of backing out of the duplex deal and i would loose 5 k and using the 30k downpayment and some other cash to rennovate it then mtg it thru a bank .Or buy the duplex and ask her to hold the mtg until I can get the first loor rented out mabey 5 months because the outside needs work as well
Then go to a bank and get a mtg on the house and do the next two floors as i go along with my own cash as i get it and then mtg the building out again . I think I could get the house for 70 mabey 80 .And I think it would be a property that the college would want to own as well
Iam not sure which direction to go .if Ididnt have the deposit on the duplex and Iknew of the other house Iwould have went with that in the first place I like working on projects like that . I would like to buy bolth but I am not sure if Ican get financing for another house if I buy the duplex
Thanks
Roy
Jeff : You hit the nail on the head and thats what i am afraid of . I havent checked with my bank yet to see if I can get financing for bolth. I also have a feeling that the colege offered her 90 for the property when it was in better shape but I cant confirm that .
I'd aggressively pursue a construction loan for the student rental; but get it tied up on a PA right away.
Get a bunch of photos and even a couple contractors to write up what needs doing. take all of this to your firnedly locally owned bank and beg. hopefully if your credit is OK, they'll OK a loan for you on the merits of the studnet rental.
If not, you'll have to start shopping for purchase money (unless the lady will sell to you on terms).
If it's a deal with doing, you should do both on their own merits.
Thanks for the advise its been 4 yrs since I bought the house . I also just stumbled on my mailbox on this site .I never bought the other .She sold it to someone else . Since then I have purchased several houses in the college area and they are doing fine . I am a General building contractor , I do mostly residential work . Med to large additions and structural jobs. I am looking for a commercial building to be used for a for a takeout food operation with some limited seating . I am trying to find an existing restauraunt thats closed or in bankrupcy in a B or C location . I want to rework it an utilize the existing equipment and existing mechanicals within the building . . I can save a lot of money that way . I will also need financinfg for it . I have a very high credit score so I am not anticipating an aweful lot of problems . I am lookng in upstate NY . Any suggestions
I currently have investment property in a couple of different states besides CA. And I don’t use any property management company.
However, my “tenants” are actually tenant/buyers on a LO or CFD. Which helps to alleviate a lot of the typical maintenance issues.
When it comes to rehabs, I actually coordinate and manage everything from CA, and only travel when necessary.
The last one I did only took two trips of about 3-4 days each. And then one final trip when I signed docs with the tenant/buyer. Things went extremely smooth all the way through on that one.
I have another out-of-state rehab going right now…but it’s too early to tell how it’s going to go. But so far it looks like it should do fine.
I should point out that I have years of experience producing large stage-productions and shows around the world. So, I am use to coordinating and managing large projects in remote locations and from afar.
Heck, some of the big stage-productions I’ve done have had far more fabrication and construction than any house I’ve ever done!
: )
I live out of state and manage from afar. The hardest part is finding those you can trust to work with you. There are a lot of dirty contractors and a lot of great ones. You have to spend more time getting to know people and you have to be good at getting a since at what they are about. Everyone is not about making money they some are about getting over. You must bea able to get a feeling for who you are dealing with and what they want. Some are so hungry that they just want to take your money and run some see the long term return of working with you and will seek to make sure your okay and handle everything as if it is thier own. I find my own property manager and maintnenance man and I try to always ask questions and let them know that I really appreciate what they do for me and always remmeber them in the holidays as well. You will truly get out of it what you put in to it and if you think that you can just skip out of town and never have to check on things, plan on getting rinsed because we are living in a time when a lot of people are not trying to work but make a quick dollar.
Overall I love my team and you have to develop your team and show them that you love them and dont hesitate to get rid of those who dont see your way!
Since I am dealing with this right now I will ad even more, Dealing with banks and getting draws on construciton is even more difficult and then getting the money into your account to pay contractors is another obstacles because they always want thier money yesterday but it takes more time to get it too them.
Out of state investing takes skill and it also takes patience and if you worried about some things if your in town you will get even more if worried if your out of town.
We live in Hawaii (my husband is active duty Army, and I am a reservist here) and we use a property management company in Alabama and Georgia (one company) and it is 7 percent. I tried to manage my units myself, we have 5, 2 duplexes and 1 SFH and I found it HARD. At the time the only simple one was the duplex that was managed by the company that we used now because the previous owner insisted that we use them. Now I find far less headache by using the company but I will say that since my husband is gone 15 months at a time and I am a 23 year old female I DO and was getting treated differently by tenants when they would meet me at times now since I have the PMC do everything it is simpler but I am still learning. When we are back on the mainland I do want to try to manage it when i am closer but even with are commisions we are still cashflowing quite well (i guess) lol.
I like multi family houses... They might be tougher to get up and running at 100% occupancy, but when they are running and you have a vacancy, only part of the payments are not coming in...
I would say at least 3 months reserves for vacancies... AT LEAST!!! Once you evict a tenant (which can take a while), then you have to get in there and clean it up, paint it, replace carpets, holes int he wall, etc... then you need to spend more time getting people in there to look at it (possible renters)...
I would have as much reserve as possible, but definitely at least 3 months...
Good Luck!
Whoops! I got a little trigger happy...
My bad![ Edited by mattfish11 on Date 06/15/2007 ]
I like multi family houses... They might be tougher to get up and running at 100% occupancy, but when they are running and you have a vacancy, only part of the payments are not coming in...
I would say at least 3 months reserves for vacancies... AT LEAST!!! Once you evict a tenant (which can take a while), then you have to get in there and clean it up, paint it, replace carpets, holes int he wall, etc... then you need to spend more time getting people in there to look at it (possible renters)...
I would have as much reserve as possible, but definitely at least 3 months...
Good Luck!
[addsig]
I would strongly suggest that you start with a single family residence or condo for your first investment. You will only have to deal with one tenant and you can get a feel for the ups and downs in the landlord business.
Lenders plug in a 25 percent vacancy rate, so I would say you should be prepared for that much at least.
[addsig]
mattfish11
I assume you do your own landlording? What has been your longest vacancy? What are average make-ready costs?
As far as reserves in my opinion I keep around 6 months of all of our mortgages in a liquid account- which is a bit excessive possibly but you have to consider that if you have a four plex and 2 are rented and two vacant and you are not using a property management company you may be paying for advertising costs, carrying costs for your mortgage, utilities, etc, and if a tenant moves you have to repaint and who knows what else not to mention if you have to evict which can vary greatly (for instance in GA its only $40 to evict, whereas the fee is $240 in AL ...eventhough the tenant is "responsible" that the LANDLORD has to pay to file and you HOPE you get your money back which is a whole different story depending on how much time you have. Although I have been in real estate for a while now I have only in the past year or so held this many properties (5 units ) 2 duplexes and a SFH. A previous poster suggested that you start with a SFH instead of duplex but I will say that my duplexes we way less headache than a SFH because there was a time I had rent collection issues with the SFH whereas if the same thing were to happen with the duplexes atleast most of my mortgage is paid if one tenant doesnt pay. Unlike with the SFH we are paying ALL of the mortgage while the tenant takes their time (i aleviated that problem by now only using a property management company but our properties are in GA and AL and we live in Hawaii.)
Also I would agree with a poster that 3 months may not be so bad but may not be enough if there is a major emergency. Either way we are military and our income can fluctuate greatly if we were to move so that is another reason I like to keep a sizeable reserve easily acessible. So it just depends on your situation and what you can handle if something were to arise.