Four-plex
Hello,
This is my first time posting a question and I am a brand new investor. I have come across an available four-plex that is a foreclosure. The list price is 140,000 and the appraised value is 330,000. I would like to take out a hard money loan against the property value and then list it with Section 8 to get tenants. Currently, there is no occupancy. Does anybody have any advice on doing this? I'm open to any suggestions. 
What state are you in?
I'm in Houston, Texas.
Deanna,
What does the owner want to do? Are there any other liens or judgments against the property? What's the FMV? Appraisals don't mean much these days.
The property has been foreclosed on already, so the bank owns it. I looked at the county records and the property tax is up to date--don't know who paid it though. My realtor said that I had to get my financing in order before I could even get in to see it. I was planning to look at it on the inside and then hire an appraiser and an inspector. Is there a better way to find out the FMV?
Danna why would you spend money before you even get your offer excepted.
Since there is no one living there I guess the building will need major rehab work.
Go speak with a construction loan officer to get pre-approved before you spend any of your own money.
I am working a deal just like this one at this very moment. This the steps that I have taken. 1. I view the building with the agent. 2. I eyeball the needed repairs, I figure the offering price and the rehab costs so that I can at least get a no money down buy. 3. I got a construction rehab specialist to come out and confirm my rehab dollar cost. 4. Next I contact the construction loan offer to see if there is money to had for what I am planning. 5. I will get the work write-up to detail what upgrades I will be making (I mean detailed). 6. I present the package to the loan officer and the seller. 7. I pay for the construction appraisal (I have to risk my $400). 8. If everything is well planned out, we can close the deal and everybody gets a win win deal.
The city get affordable housing, the commuity gets an upgrade. The bank get to feel good for making a loan to a nice young man like myself (smile). I get 20% equity built in and a nice cash flow.
Thanks, Vern. I will try that and let you know how everything works out.
Vern gave you excellent advice. my first investment was a vacant tri-plex. My biggest challenge was filling all three units, because the area was sort of in the boonies, which is what made the property so cheap. Using Section 8 is an excellent idea. Many investors think Sec. 8 tenants will bring down the property, when in reality sec 8 requires that tenants do not behave in a manner to get evicted. If they are evicted, they are then kicked off of the assisted housing list. Section 8 tenants have been the easiest tenants for me to deal with. For now!
DeannaJo,
You better do your due diligence on this one! Banks are NOT in the habit of listing their bank-owned property at 40% FMV! If they listed the property for $140K, you can bet that their appraiser/assessor has already looked at the property and said that that is what it is worth.
Also, the housing market (values) in Houston are pretty much stagnant or have even declined over the last few years, except in places like Kingwood, The Woodlands, or Sugar Land. And even in these places the property owners are barely breaking even when they sell their property.
There are 4-plexes for sale all over Houston, especially in the Alief and Aldine areas. I know for a fact that some (most) of these owners are selling for LESS than they bought the units for! Most of the 4-plexes I have seen are selling for around 5X Gross Market Rents. That means that a 4-plex which creates $2000 per month in rent can expect to be sold for around $120K (2000X12=24000, X 5=120,000). So obviously, the selling prices are directly tied to how much rent the property can produce. A 4-plex listed at $140K seems to be about what the market will bare. Keep this in mind.
I am not trying to rattle you or scare you off. I feel that multi-family units are definitely the way to go. If this property is indeed listed by the bank at 40% FMV you'd be crazy not to jump all over this deal with both feet! Good luck and I hope everything works out.
[addsig]
Hard money loans charge a very high interest rate, it would be interesting to see if the numbers work?
Have you gotten this far yet?
Bginvestor
Have you considered using an investment company that will actually come to the table and create a mortgage for you using seller financing? It can get you into the property using the equity and if you are using the right company not jumping through bank qualifying hoops! If you interested in discussing that furter contact me at CSRE9@aol.com
Quote:
On 2003-04-22 00:52, cjorden wrote:
Have you considered using an investment company that will actually come to the table and create a mortgage for you using seller financing? It can get you into the property using the equity and if you are using the right company not jumping through bank qualifying hoops! If you interested in discussing that furter contact me at CSRE9@aol.com <IMG SRC="images/forum/smilies/icon_smile.gif">
Where can I find out a little more about this technique?
I did some further investigating and found out that there was some serious appraisal inflation going on with that fourplex.
I will keep looking though. Thanks for all of the great advice!
If I own rental property, what steps do I need to take in order to be able to accept Section 8?
You can contact your local housing authorities. Try typing in "Section 8 + whatever city you're in" on the web. This should help you to find out how to contact the section 8 people. By the way, what state are you in?