Pros & Cons To A "for Sale By Owner" 4-Plex
I found a 4-Plex for sale . The owner wants to do "owner financing" the cost is 149K with a $1700
income. She wants 20% down and $870 per month for 30 years. Besides no closing cost what are my "Pros& Cons" to this? 
$1700/MO. =$20400/YR.X 65%=NOI or $13260. With a cap rate of 10 ...this price is too high. In addition, $30,000 down is a chunk of change...your ROI will be over 10 yrs. Anything that i can't recoup my money on within 2 yrs. i leave alone...money begats money...no money no begats...another thing, are the utilities separate or included... best regards...C.Walker
Could she sign the Deed to you? If so could you refi after six months to a year? Because with the owner financing you are going to pay the owners a total of $313,200.00! That's almost %11.7 interest, that's isn't tax deducable.
Lance 8-)
$870 x 12 = $10,440 per year.
I'd give her what she wants, it will be yours F&C in less than 12 years.
If you can afford 20% down (30K) why wouldnt you do a no-doc loan or some other instrument that would allow a better interest rate? Plus, I assume the 1700/mo is the gross rental income if completely rented. What about future repairs (roof, siding, etc.) and carpet and appliance purchase and repair and taxes and insurance (insurance can be high on a 4plex) and landscaping and adverstising... ...
OH, and Dont listen to the person that said it would be Free and Clear in 12 years. They were obviously sleeping during math class.
Yes I can refinance or pay off anytime, She's charging an 8% interest, I cant find anyone that will do a no-doc loan I tried many banks because I'm self employed. After bank note is paid, I pocket $700 a month . would this be a safe investment? :-?
If you have the money to put down, and nothing better to do with the money, this does not sound like a bad deal. You could refi down the road when you income situation is more stable.
Sounds like a good deal to me. I would try for better financing as well but if you can't, you can't.
Quote:
On 2004-03-22 19:56, timdog10 wrote:
Yes I can refinance or pay off anytime, She's charging an 8% interest, I cant find anyone that will do a no-doc loan I tried many banks because I'm self employed. After bank note is paid, I pocket $700 a month . would this be a safe investment? :-?
When you do a no-doc loan, the bank doesn't care if you are self-employed, or employed at all for that matter. A true No-Doc loan means that almost nothing outside of your credit and property information is verified, including ANY of your employment and asset information. If you are talking about a STATED income loan, thats a different story.
If you can't find a place that will do a 4 unit no-doc deal for you, let me know - I got a program at 75%LTV, no doc, up to 4 units, min FICO is 620.
If you have been self employed for two years, we can do a no ratio or stated deal up to 90%:LTV.
Whether the deal is worth it, I can't say - don't have enough experience investing for my opinion to count (yet).
[ Edited by vasiliy on Date 03/23/2004 ][ Edited by vasiliy on Date 03/23/2004 ]
First and foremost, I'd negotiate the interest rate down. If you're giving her 20% down, why the heck would you want her to carry it at 8%??? At 80% LTV you can get 6% fairly easily. Sounds like she's taking you to the cleaners and you're right behind her. 8% might make sense if you only had to come in with 0-5% down, but not 20%.
Couple of ideas. Have her subordinate her note so that she's in second position, get a 20% LTV 1st from your local bank, and do the deal (if it makes sense).
cwal calculated 35% expenses and said it was too expensive. If that's true, he's probably right. However if you're managing it yourself and doing a decent job, 25% is realistic in many areas, and gives you a cap of 10% and change, and probably a decent price. Make sure that you're not paying too much for it. Get sold comps.
You'll be able to bargain a lot more regarding the financing with a FSBO than a bank. A friend of mine and a TCI member recently bought a FMV home for 0% interest 100% LTV. Find a bank that will do that for you.
It sounds like she's getting her asking price, a great interest rate, and security, thanks to your 20% down. Personally, it sounds like it's a great deal for HER not you.
where do you guys find this financing i know of some companys that will do 95% ltvs for investors with ARMS to die for. but I can't tell you or there going to put me in TCI jail for spaming
I'd like to Know what the guy above is doing if that anit spaming then what the hell is. All I want to do is help people get there GOD GIVEN RIGHT TO THE AMERICAN DREAM and any info should be under FREEDOM OF SPEECH LIFE LIBERTY AND THE PERSUIT OF HAPPNESS. So look out dude or you'll be in jail.
I'm sorry to every one if it upset you I was not yelling just see another investor trying to help out the new guy on the block succeed in this buisness and wonderful world of RE investing. GOD I LUV IT!
:-? [ Edited by gunhead5 on Date 03/23/2004 ]
why don't you ask her to take out a equity line to get her 20% down. She gets what she wants and you continue to pay her, but do use a third party to make payments for you.