No Disclosures In Purchase Agreement?
Aloha,
I recently had my RE agent put a proposal on a house that I am interested in with a contingency clause stating subject to loan approval and inspection. The seller (FSBO) countered on the contingency clause but not the price. She wants no clause in the agreement regarding loan approval. Is it safe to resubmit the offer without the clause? I am pre-approved, not that that means much. Any advise?
Yes, that would be fine. In a Purchase Agreement, you could leave out all contingencies. Just make sure that the Contract states the only recourse the Seller has is the retention of the earnest money deposit.
[addsig]
Thanks so much for all the valuable information. Unfortunatly the house has already sold. I will apply the knowledge that all of you have given me to future deals! Thanks again.
much of this is "fill in the blank" on LC forms. See if you can d/l one ot get it from a title company.
Instead of having a roofer look at the roof, have a professional home inspector look over the entire property. The professional inspection will note the condition of the roof and anything else that may be a problem -- electric wiring, furnace, central air, water heater, plumbing leaks, and structural issues are all things that you will have to factor into your final offer.
You must compare the ROI to like properties in the area. It can vary greatly.
Take care,
$800 a month for a 50k property is a deal I would do, depending on amount of rehab needed.
[addsig]
A fairly good metric is the Debt Coverage Ratio.
Look at your net operating income -- the amount you have left from your monthly rent after you pay all your operating expenses to include property taxes and hazard insurance.
Divide your net operating income by your loan payment (principal and interest only). If the answer is at least 1.25, then your cash flow is usually sufficient to support the property.
WOW! All of these complicated formulas I feel like I need to be a math matician to own a few rentals.
Look it really is not that complicated... I am really good a addition and subtraction (with a calculator)
Add the following up: Principal, Interest, Taxs, Insurance, HOA (if applies) Prop. Mgmt Fee (if applies) Maintenance, and Vacancy. If all of those added together are less then your monthly income... then you are doing alright.
There are many places in the country that simple formula is not used b/c the cost of rental property is so high.
$50k and $10k a year. Not Bad. As long as it is not a rehab and not in a war zone, I would go for it!
It is not a good idea to make buying decisions on rules of thumb or various measures (metrics). This is particularly true of ratios such as Gross Multipliers or Cap Rates. ROI numbers can be misleading unless you know what is included in the "Return" calculation. If you need management was management costs included in the Cap Rate or ROI calculations.
These should be used only as a smell test in screening. I know that if the monthly income is 0.3 percent of the purchase price, there is no need to consider any further since there is no way for me to make it cash flow.
It is best to work up cash flows from the best information available. The greatest uncertainty is going to be maintenance and repairs. Along with this is evaluation of appreciation performance, vacancy factors, availability of future tenants and future rent raises.
Quote:
On 2005-06-07 18:27, anolimitsky wrote:
WOW! All of these complicated formulas I feel like I need to be a math matician to own a few rentals.
If you want to get a quick calculation of all the formulas use RentIncome.Com to punch in your numbers and get a detailed report on the economics of the property.
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[ Edited by focusagent on Date 06/14/2005 ]