Is This Worth Going With
i currently have under contract a possible 3 unit building for 35k. the property was listed for 50k. Estimates for repairs are 10-15k. Realtor states AVR should be in the 70k mark. My questions are.
1. does this sound like a good deal. the property is very close to state univ. one unit is a garage small apt. upper unit is 2/1. lower unit could be 3/1. total possible rents could be 1k.
2. after sell could I get either line of credit or some type of fin. to cover repair cost so I could hold on to my cash.
thank you for you advise.
lw
My first thought would be how long has the subject property been on the market at 50K?
If you were able to purchase for 35k and put 15k into it you would have 50k into the game.
Let's take the value of 70k less your 50k investment you have a gross profit of 20k work with. (If sold at retail). And let's say it takes 6 months to move the subject property.
MV = 70,000
REPAIR = 15,000
INTEREST = 1,250
RE TAXES = 325
INSURANCE = 378
UTILITIES = 420
REALTOR COMMISSION = 4,200
CLOSING COST = 1,050
TOTAL COST = 22,623
TOTAL VALUE LESS COST = 47,377
YOUR PURCHASE PRICE = 35,000
PROFIT = 12,377
Based upon the profit ratio I would first review the following:
Does the subject property have any building code violations?
What is the rental market in the area?
Is the subject property within walking distance of the university?
As far as credit it will really depend upon your credit score and debt to income ratio!
The most important number in the transaction is the price paid for the property. You need to find information about “income valuations” and “capitalization rates".
The rate that you get for the transaction depends primarily on the term of the loan, the structure, your financial strength as well as your negotiation skills. I would use a 6% rate for a five-year term loan and a 7.00% rate for a ten-year loan as guidelines.
75% loan-to-value is pretty standard so based upon the value of 70k you can get around 53k.
This has the smell of a great deal!!!!!!!!!!!!!!
Yes this is a decent first deal. You say that the lower unit could be 3br/1ba. Is this a nonforming unit or one in huge disrepair.
I find it unlikely to be able to get a line of credit on a rental property but I do suppose anything is possible. I think you best bet for this would be a local bank.
GOOD LUCK
A line of credit might be hard but you could take out cash at closing without too much trouble at the figures quoted.
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