Well for everyone that is interested in whats going on with my real estate life, I will do an update for ya. For those of you that are new to this blog, I was looking at purchasing this property about 2 weeks ago, then someone bid before I could, and the sellers took the bid. Since than I have been searching..
I found this property for $89,000. It looks like someone came and flipped the house, and nowthey are trying to sell it. They converted the garage into a bedroom, they also repainted everything and cleaned up the outside really good. Its has 3 bedrooms and is great for renting. I will be making an offer on this soon. I might go look at it again tomorrow, and If I do I will take some pictures.
As for the other house, the realtor called me this morning and said it is back on the market. He left a voice mail and I haven’t called back yet. I dont think I will though, that property looks like too much work for me. Its a 5 unit apartment building, its 40 mins away, and I have to get a commercial loan to get it. Im thinking about starting smaller…
Ill show ya some figures..
Sale price = $89,000
Offer them = $85,000
After closing costs = $90,000
Put Down = $13,500
Monthly Mortgage @ 7% (investment property) =$510.00, paying interest only would maybe be like 450-470 month.
Charge renters = $700.00 month
Profit monthly = $200 or so
I will try and post an update to this tomorrow 
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Nice looking place for 89k! Any photos of the inside?
that house is cheap(I am from the uk where the houses are a lot more than that).
Average Cost: £184,924
Detached: £285,697
Semi-detached: £170,650
Terraced: £143,512
Flat: £174,052
£1 = $2
I would go for it, get a interest only mortgage and rent it out, over time your equity in the house will grow.
Ya, looking good, I would like to see some inside pics as well.
Have you looked into commercial real estate? It has some benefits in comparison to residential real estate, such as longer leases.
That is not a lot of profit for the investment. And they are saying right now that the US real estate market is going to crash. Check Google News, Drudge…
Honestly, I would wait six months at least. You should find some REAL bargains then.
Don’t forget houses need roofs, furnace fixes, basement floods to clean up, and more. One house a relative of mine invested in cost her $20,000 in 3 years for all those things. Luckily she bought it CASH, and so the rent covered it. In the end she made out but it was special property in a vacation area, everything was climbing.
AND you aren’t factoring in:
- property taxes
- house insurance
JT - my area is pretty steady right now. I know in California, arizona, and other areas of the high real estate prices people are loosing money. In my area, houses under 250k are still selling good. Im not to worried about a crash here.
I did forget the taxes and the insurance. I still need to talk to my mortgage guy to get an exact price on the monthly mortgage and get all my number straight.
Thanks for commenting
as Dre said, commercial property is more stable with longer leases and yearly increases in rent according to inflation (or a set percentage), i know in Australia that also any land taxes/rates are to be paid by the occupier and not the owner such as residential property. But in the US im not sure on how that would work. It would also be interesting to find out how I could possible purchase some of these properties and just get a real estate agent to do everything in terms of any repairs/renting out/etc.
I agree with JT. That’s a lot of work and ties up a lot of money for $200 a month. I don’t think it’s worth it. I think you should put your money in savings and mutual funds and focus on your web business. That’s how you made money and that’s what you know best.
So i assume 5+ units is considered commercial property then… why try to find a triplex or quad? Or even start with a house and rent it out or lease-option it?
As for the other property.. some may have done their due dilligence and found something costly. Remember to ask for all of the papers, tenant reciepts, tax papers, it will make a difference if a management company manageed it or the landlord, so remember to look into that…
Jon: No, real estate might not stop in your area if New York, etc. is crashing. There HAS to be a slow down happening already though, and you should ask the agents how many days on the markets houses are sitting now compared to the last 3 years.
Regardless, the economy is SURE to follow the big housing crash, because housing has been propping up the US economy. SO, first the bad lenders go into bankruptcy. Then Wall St. stocks fall. Then China, who is sitting on HEAPS of US currency take a big hit, maybe floods the world market w/ US dollars. US currency becomes a peso. World economy slows down. Factories/companies have to scale back…
Now everyone is a lot more cautious because firms are having to close doors, lay off people because orders aren’t coming in. So the rate of house sales in YOUR area will be effected. People don’t go out and make big life changes in that kind of economy.
There’s only one thing that can protect you locally: Do you have a new factory or something big coming to town in the next year or two? If so, then there will be a continued need for housing. Especially renting as single guys, etc. will need a place to stay.
If this isn’t the case… wait. What are six more months going to cost you? $1,200 at most in terms of lost rental income? But you can generate more than that using the money and doing Arbitrage, etc.
And then you’ll know whether this fall-out is real or not. And if it is: Party time! Cheaper housing to buy. NOTHING like buying at the bottom of a cycle. Then you can’t lose.
But if you buy now and the economy goes down, you’re stuck with a house you can’t rent, AND you can’t sell for what you paid for it. Now instead of making you $200 a month its costing $510+insurance+property tax.
PS: If you DO go ahead, the sale price is $89, start at $80 not $85! Maybe even $75! Never start that high. I would start $75 for sure, to test the water. All they can say is “no”. They won’t turn you down if you make a good offer a second time from you. And if they come back at all, you can get it down from there.
PPS: All the real estate experts I know say one thing if you’re buying RENTAL property, which is get it at least 10-15% below market price. And you might make up to 100 deals before you get one sufficiently low. This way if you need to turn the place around to break even, you can. Because to resell it means all these fees again…real estate, laywers, etc.
PPPS: Always buy the LOWEST priced house on the block, if you can. Because your house will always look like a bargain compared to the others and the value of the area will increase, bringing your house up a few notches. Whereas the biggest house on the block will rise much less in overall value.
Good luck!
Also: If you think the person that fixed this house is buying it for a flip…
That means there’s little profit on the resale side. It’s top of the market. Imagine someone bought a website for $500, fixed it, and sold it to you for $1,000. Would you buy it? That’s basically the max it could/would make. You have to ask yourself, just like you would with a website: if the potential is there to rent it, why not do it themselves?
Good friend of mine is a self-proclaimed “slum lord”. He buys junky houses for a song, doesn’t do much to them, rents them out for cheap. He’s up to nearly 20 houses now, well over $1.5 million in net worth on his houses alone. He’d say find a house like that BEFORE its fixed up, buy it, jam someone into it.
Stuff to think about. Feel free to ignore all this.
Don’t forget to factor it
Vacancy Loss
Maintenance
Property Tax
Insurance
Utilities
then see if ur cashflowing.
Great point Wes.
Wow I didn’t even think of that Wes, yeah that could totally annihilate your profit.
So it’s all going well then, Jon?
“Always buy the LOWEST priced house on the block, if you can. Because your house will always look like a bargain compared to the others and the value of the area will increase, bringing your house up a few notches. Whereas the biggest house on the block will rise much less in overall value.”
Yep. The old saying is “Buy the worst house on the best street”. But then again, the other saying is “you’ve got it backwards, you buy the best house on the worst street and then you can ‘lord it over’ them”.
I couldnt open the picture but it sounds cheap even for me from middle europe. I would suggest accomodate students if there is UNI around than you can charge them per bed.
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