Possible Deal, Need Help
I have a friend who wants to sell me his 3-unit property. No brokers, no middle people just me/him and mortgage broker(she is amazing) Here are the Specs.
3-Unit Property in Wilkes Barre, PA-
Unit #1 is 2 bdrms, Unit #2 is 2 bdrms, Unit#3 is one bdrm. All utlitites paid by owner except electric and cooking gas.
Income:
Unit#1: $525 (rented) 2bdrm
Unit#2: $475 (rented) 1bdrm but has room like another bdrm
Unit#3: $550 just rented, referred by a good paying tenant downstairs
the first 2 unites have not had a rent increase in 1 yr. so I can raise it $25 each? extra $50 per month
Min. total montly income(as is)= $1550
Selling for 105k
Proposed loan 115k
6% seller concession $6900
I get a little over 3k cash back at closing.
115,000-6,900=3100 plus any amount left after closing cost are paid.
Rate at 7.5% interest only. . Payments= $720
break down:
mininum income range:
1550
- 720-mortgage
- 200-taxes(annual is $2400)
- 50 -insurance(about $600 annual)
- 43 -trash(about $500 per year)
-250-heat(about $2,990 per year)
-101-water/swr ($1221 per year)
= $186 net per month, but I get over $3,000 cash at closing,
I plan to collect rent on a monthly basis (its a 2 hr drive). there is a handy man in place already.
I plan to hold it for 2-4 years, some apperciation then sell or refiance.
any advice, reduce expenses, increase income, financing techiques, etc? good deal?
It apprasises for 115k.
I can get it no money down but no cash back. cash flow a year should be around $215 maybe. things changed last minute
is this enough of a cashflow?
You should buy the first one you posted for 84k. It will be difficult to make this cash flow paying utilities like that. Thats $100/mo off the top, and you got to hope they are conservative.
"3-Unit Property in Wilkes Barre, PA-remolded and vacant
Unit #1 is 2 bdrms, Unit #2 is 2 bdrms, Unit#3 is one bdrm. All utlitites are separate they would pay hot water, heat, electric.
I would only be responsible for mortgage, taxes, insurance, trash.
Income: estimates
Unit#1: $450-475
Unit#2: $400-425
Unit#3: $375-400
Min. total montly income= $1225
Asking: 84k "
Yes, if the 81k deal is in the same area, with similar rentals, then its a very good first deal. If you even get one rented at $400, you probably will cover more than half your mortgage.
The only question is why is the current owner not renting them right now. Seems like he would at least put one tenant in while he was selling. Even 1 tenant would increase his position and value of the property. Good luck.
I would do it if it is in a good neighborhood, good duplexes are like needles in a haystack in my area.
Get rental rolls and responsibilities by the landlord - in other words things like, are the tenants or landlord responsible for water, heat, garbage, etc. Get some profit and loss information from the seller.
Comps are good to make sure you are not being overcharged for the local market, but have little to do with cash flow. For a very rough estimate of value, use the formula the lenders do- PITI should be 133% of rents to break even.
So if taxes are $85 a month, insurance something like $60, rents $1025 then you have about $625 to cover your payments. Deduct your profit and figure what it is worth based on what the remaining amount will pay for.
Chris
Quote:
On 2007-02-13 22:58, jchester wrote:
Comps are calculated 3 different ways: by comparable home sales in the area, by income approach, and by sq ft (or, by replacement costs)...
Jchester, APPRAISALS and opinions of market value are calculated 3 ways not comps. Comps (comparable sales) are only utilized in one method, the sales comparison approach to value.[ Edited by rehab2day on Date 02/14/2007 ]