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10/20/2017 1:01:18 AM
9/22/2017 12:11:25 AM
Posted: 9/3/2005 1:11:59 PM EDT
I am currently living in a decent two bedroom apt that is one of four identical units in the building, two upstairs, two downstairs. Two attached two-door garages. Maybe I am crazy, but I think that it could be a wise investment to try and buy the property owner out. She lives quite far away, and I think that I could make money off the place. I dont know the exact property value, but I am guessing somewhere betweeo $100,000 and $200,000. If it is anywhere near 2k, I would be surprised.
First off, how do rental property owners value their property? Actual value of building and property, or as a matter of income potential from rental fees?
Now ill put on the flame suit and tell you the part that you might not like. I am 21 years old, and I do not have much on my credit report, nor do I have any existing loans in my name. If I bought out this place, I would want to do a somewhat long-term mortgage, at more than 15 years, the rental income would pay the mortgage payments, all expenses, and leave me with 800 or 900 a month in pocket. The building is in good shape, but I would of course want an inspection done before hand to see if there are any foreseeable major repairs that would need done.
If I tried to apply for a mortgage, would anyone even take me seriously? Or will I just get laughed at when they see my age? I am a college student, and I think that in my future I would want to own several rental properties as an investment, its the only market that I see as being reliable (people gotta live somewhere).
Your comments would be appreciated.
Link Posted: 9/3/2005 1:24:51 PM EDT
[Last Edit: 9/3/2005 1:26:33 PM EDT by AR-10]
Financing commercial property is not like financing a home.

The interest rate will be higher, and the term of the of the loan will be a lot shorter. The eight or nine hundred you hope to pocket will become less than that as the monthly payments are going to be higher than you are thinking. The income will just about cover monthly expenses you will incur fixing broken stuff and buying a new roof/furnace/water heater every once in a while.

And then there are the property taxes...

Just my personal experience with a rental house, which I would love to sell.
Link Posted: 9/3/2005 1:26:47 PM EDT
It does not sound like you would qualify for the loan
Link Posted: 9/3/2005 1:27:39 PM EDT

Originally Posted By AR-10:
Financing commercial property is not like financing a home.

The interest rate will be higher, and the term of the of the loan will be a lot shorter. The eight or nine hundred you hope to pocket will become less than that as the monthly payments are going to be higher than you are thinking. The income will just about cover monthly expenses you will incur fixing broken stuff and buying a new roof/furnace/water heater every once in a while.

And then there are the property taxes...

Just my personal experience with a rental house, which I would love to sell.


If I were to live in this property, and call it my "primary residence", and rent the other three units, would that make any difference?
Link Posted: 9/3/2005 1:32:13 PM EDT
[Last Edit: 9/3/2005 1:33:44 PM EDT by AR-10]
No.


Well, OK, you caught me. I am guessing here. I think the bank would still call it a comercial venture and stick it to you.
Link Posted: 9/3/2005 1:36:58 PM EDT
Lot's to cover here.

First, find out if there is any interest from the current owner in selling.
Next, if they are interested, get an appraisal.

The financing part, will be another question altogether. Your bank will let you know very quickly if you will qualify for the loan.
The hard part, it sounds like will be coming up with the down payment.
For example if it appraises for 150,000 you will need at least 30,000 down to get a bank that doesn't know you, to do the deal.

Ideally you will be able to buy this property BELOW the appraised value.

While it seems like a pretty ambitious project for a young person like yourself.......you are older than I was when I bought my first home.
I did however have an excelent relationship with my hometown bank.

Good Luck

Your best bet may be in talking the current owner into owner finacing it to you.
Link Posted: 9/3/2005 1:50:08 PM EDT
Owning residential rental property is not as easy as it may look. My father owned several residential renatals years ago and there are MANY things you HAVE to take into consideration.

1. What about deadbeat renters?

2. What about maintanance?

3. What about the times you have empty units?

Just wait until you get some deadbeats who won't pay and you have to jump through all the legal hoops in order to get them out without you getting into legal troubles. What about the units that get trashed by the renters and then leave? What about bad checks, late payments, etc. ? Been there, done that. What will you do when you get a call in the middle of the night telling you the plumbing is screwed up, over flowing toilets, roaches, etc. ? My Dad eventually got rid of it all and told me he had enough to be a PITA but not enough to justify and full time guy running them, doing maintance, etc. Just wait until you have the "renters from hell" , just about everyone renting gets them at times.
Link Posted: 9/3/2005 2:02:27 PM EDT
[Last Edit: 9/3/2005 2:03:06 PM EDT by Furner]
As far as maintinance goes, I already do most of the fix-up stuff around this place anyways, the only thing I wont touch is these damn windows...they are the counterweight type, and the wires on the counterweights are broke, and the windows are somewhat permanant. Nothing some prop-rods wont fix.
I think that I would be able to be a hard-ass if i get the renters from hell, or deadbeat renters. The current landlady has a really soild rental contract, and she is really flexible on it (says no car repairs on property, but I just asked and got the ok for oil changes, as well as some work on the drivetrain, she also gave the OK to paint the unit, even though the initial contract prohibited it), and hopefully I would be able to adapt the contract a little and use it myself.
I probably wouldnt be overjoyed to get a phone call in the middle of the night, but until I get my own house, living on site would probably make things easy.
Hopefully by living on site, I would be able to spot the renters from hell before they take the place to the shitter. Our current rental contract allows the owner to take control of the unit with 30 days notice (and she has practiced it on the horrid woman downstairs).
I would have a problem with financing, I dont have a existing relationship with a local bank, and my parents would probably slap me if I asked them for assistance.
Link Posted: 9/3/2005 2:16:25 PM EDT
Owning rental property is a big pain and a great way to build wealth.

1. Go to your county courthouse and pull the tax records for the property. It will tell you what the taxes are as well as what the county thinks it is worth. In some places this is close to the real value. Other places there is no correlation between the market value and the assessed value. In addition, you can see the last time the property was re-financed and the amount. You can extapolate what she owes on it presuming she has made all of her payments on time.

2. Know any realtors? Ask one or two to do a market analysis to see what the property is worth. There may be another one like it near by that is already for sale and the owner wants to get out of it.

3. Talk to several mortgage brokers and see what the real deal is with financing a rental property. I believe if you live in the property you can qualify for FHA and other Gov't housing programs. I believe you can do that with quads, tris and duplexes.

4. If you decide to go forward, offer the current owner at least 20% less than the market value since she will not have to pay to fix up the property or pay a real estate commission. Another option is to offer her more, but have her agree to pay the closing costs out of her portion of the proceeds.

Good Luck
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