haaaeeelllllppppp!!!!!!

[afterdigital]

i'm so skurred......

ima bout to buy ma 1st property.....no money down....bank says yes....
my mind says no....too risky.....

All jokes aside, i have this great opportunity to buy into a 4unit bldg with a rent roll of $5100 a month. The bldg is priced at $500k but i won't go passed $470k for the simple fact that it's rundown! let me explain.

Each apt. needs a whole new kitchen, or at least new appliances. The bathrooms need sinks, cabinets, toilets and tubs. Some of the floors are carpeted which i want to rip out and polish the wooden floors underneath.

My only problem is money (isn't it always the problem/solution?)

I qualify for 102% financing if i take care of part of the closing cost including attorney, etc.

What can i to get the financing to do the repairs? Such a great opportunity, i don't want to pass this up without seeking every option.
One of them being to give this up. LoL

I seriously think $15k will take care of all the repairs...if only i had $15k just lying around - hmmmmmm

My question to this forum is can anyone come up with some creative way of borrowing rehab money?

[mochilero]

Did you check into rehab loans that provide enough fro the purchase AND the repairs/improvements? Talk to a loan broker or banker.

Otherwise, if you own your own home, can you get a second mortgage on it? Risky, and you better be sure you still have strong cash flow even with the additional payment, but a possibility.

[karlakr]

This deal sounds pretty thin to me.  If the cosmetic condition is as you described what about other impending items such as roof, furnace/AC, plumbing, electrical, water heaters..................

At the current rent I'd try to offer more like $450,000 so you have plenty of room to make the necessary repairs and still have play in the numbers.

Of course it all depends on what your goals are for investing, but in the past when we've bought with $0 down we've wound up regretting it.

On paper, as you described this, in my opinion it's not yet a "great" deal..........................get them to lower the price.

Karla in Amarillo

[afterdigital]

thanks Karla,

you may be right... 0 down is a risk in and of itself..... there's also the fact that i may not rent all the units out at the same time -- eeeeek! then what the h*ll am i suppose to do. default on my mortgage (here i go again, being skurred  

I will make them an offer of 15% less. what have i got to lose? nothing, if i just walk away.


Mochilero,

i will check to see if i can get into a rehab loan, especially if the seller comes down in price.

i am working with a mortgage lender right now and he's crunching numbers with results tomorrow. The area this bldg is in has had a steady growth of 12-14% yearly return. even if my net is small and i can't touch it (for repairs only), in three years i stand to reap the rewards (equity possible to buy another bldg. - i like the sound of that ).

2005AD

[black95gt]

if you are getting $5100 per month at the current time, why bother with the repairs?  If you make all these repairs you will have to raise rents and make about $8500 per month.......why not just do repairs as needed, or when a tennant moves out.  Then throw some money into that one unit and so forth

[TamiSpartan]

You're starting big for a first property.

That is substantial rental income for a run-down, four-unit building. Where is it? Are we to assume there are tenants in place for each unit? Thoughts on what to do with them while their places are under these extensive renovations?  

$15k divided by four gives you $3,750 per unit for interior repairs -- kitchens and bathrooms are expensive investments when rehabbing. Not to even mention the exterior issues. You'll want to get a certified inspector into each unit before you close to make sure you're not missing anything major, and bring a contractor with you (unless you plan on doing all the work yourself). I drag my contractor and my inspector through anything I'm negotiating on, it's more than worth their fees -- it's saved me on more than one occasion.

What is the ARV of the property? You mention the asking price, but an ARV will really help us to give you ideas.

Good luck to you! This is fun.

[afterdigital]

Posted by: TamiSpartan
You're starting big for a first property.  
 
The solution is in listening to what is truly common sense.  

This bldg is currently vacant.  Although i can rent as is, certain things i cannot avoid, like refrigerators and painting and possible stoves and toilets and sinks replacement.

As for major repairs - including windows, carpet removal, floor refinishing, kitchen cabinetry, I'm positive the proper repairs will make the rentals more enticing, thus a better return on my investment.

Posted by: TamiSpartan
What is the ARV of the property?

What do you mean by ARV? if referring to my Return on Investment, i am looking at %51 with little or no money down, my motgage guy is looking into this. As it stands, the figures are as follow:

500k asking price + 15k rehab loan + 10k closing cost
0-2%(10k) down
3600-4100k = monthly mortgage incl. ins+taxes+loan
4200k = 1400k + 3 = rental units (4br each)
900 = rental unit (1br)

Did i miss anything?

i absolutely agree with you. i am scheduled to bring my inspector this weekend with me.  


thanks....
keep it coming......

[kdhastedt]

ARV = After Repaired Value.  It means what will the property be worth AFTER you do the repairs.

One assumes that the repairs/rehab that you need to do will increase the property's value to some extent.  

Example:  I bought a HUD home for $51,500.  The Appraisal was $53K.  I repaired the property -- mostly cosmetics, mowed the greass, etc., etc.  I put $3,500 in materials in (along with a ton of hard work!).  I just had it reappraised for $65K.  The APV is (obviously) $65K.

Keith

[afterdigital]

aah,

thanks Keith....i do believe the value/price being ask by the buyer is between 5-15% below value in the area.

With the repairs done there can be an ARV of $550-$640k. The gap is in determined by the repairs i make - obviously the more repairs the more appealing the unit becomes.

Regardless of the price the buyer is asking, i think a 10-20% discount is justified with all the repairs needed. i think highly of this opportunity but am not reluctant to walk away if necessary.

I still need to bring my team (appraiser and contractor) to assess the property.


i will do so this weekend....

[black95gt]

Where is this property located that it is so run down and worth so much, and that you can get as much rent money as you say you can

[kdhastedt]

black95gt,

$15K in repairs on a fourplex probably doesn't qualify as "so run down".  If you're dealing with some kitchen and bath improvements,
$3,750 (per unit) doesn't go all that far!

I spent $3,500 on a small 2/1 single family and got baseboards, paint (inside and out) carpet, a refridgerator, a couple new fixtures, new doorlocks, a few light fixtures, etc...it goes fats!

Keith

[afterdigital]

the location is the south bronx, ny.

i won't go into the deal unless he comes down 10-20%. the bldg has been on the market for some time now and according to history records ( i looked it up) the current owner, an investment company, bought the unit for 370k last year.

[kdhastedt]

So, for just holding on and collecting rent (apparently doing no fix-ups!), he beleieves he should reap $130K?  Good job, if you can get it!  I think he's smoking dog food, personally...sounds high.

If you go low, he will either:

(1) Have a good laugh
(2) Accept
(3) Counter

Years ago, I got a Carlton Sheets program off of E-bay for $30...one of the his students told him "if you're not embarrassed by the offer that you're making, it's too high"!

Keith

[eve_32]

With the new plans for all 5 boros, I think its worth it.  Have you seen what the city planner's office has decided to do in the bronx, I would think it would be of interest to you.  I would offer the $450k like suggeted and see what they counter with if they counter at all!

[afterdigital]

Posted by: eve_32 Posted on: Today at 01:14:38pm
With the new plans for all 5 boros, I think its worth it.  Have you seen what the city planner's office has decided to do in the bronx, I would think it would be of interest to you.  I would offer the $450k like suggeted and see what they counter with if they counter at all!

Eve,

could you point me those sources. i would love to show them off so that people out here don't think i'm crazy investing in that area.

i happen to have to sources with the following stats:

stat # 1: crime has gone from 30% down to 7% in the last  10 years

stat # 2: 60% of the residents are lived in by a family

sta # 3: 95% of the residency is rental!!!!!

i have a dream...and its the bronx

2005AD