Rent Vs. buy a fourplex

[crhart0807]

Hello guys,

I am fresh out of college and looking to start my career. I am also looking for ways to start saving and being financially smart early. One thing that has been on my mind often is whether to rent an apartment for a year or so, or begin getting into real estate.

I recently found this fourplex http://www.zillow.com/homes/for_sale/Hurst-TX/29212661_zpid/39084_rid/32.813146,-97.187014,32.810386,-97.191348_rect/17_zm/_fm/1_fr/ It seems to me to be a fairly good investment and something I could live in rent free while generating a bit of cash flow and fixing it up while building equity.

My largest problem is I do not have a sizable amount of money stored away in savings to put 20% down. More likely 7-10%. I know the power or investing early, and I know that there are fairly low interest rates in today's market, but I am wondering if I am simply thinking too emotionally on this. Maybe a cheaper duplex would be the way to go, or renting for a year to build up savings.

Just wondering yalls thoughts on the property/idea. Thanks!

-Chris

[Another Reader]

It's been on Zillow 345 days....

Either it sold long ago (Zillow does not remove listings, the agents do) or it's a grossly overpriced turkey.

[mpbaker22]

Read what AR said.  Also, gross rent would be $2500/month, which is just under 1% of the list price.  You want to use 1% as a minimum, according to many posters around here.

You could come out ahead, but just plugging in some raw numbers it doesn't looks like a great deal.  Not bad but not great.    Also depends on what your rent would be elsewhere.

[arebelspy]

Read what AR said.  Also, gross rent would be $2500/month, which is just under 1% of the list price.  You want to use 1% as a minimum, according to many posters around here.

On a multi-unit I'd try to shoot for closer to 2%.

Can you get this for less than half of that asking price?

Depends, based on the seller's distress, motivation, and flexibility.  Time to get in contact with the owner (not agent).

[crhart0807]

I had never heard about that 1-2% general rule, I'm learning stuff already! I have gotten into contact with someone on it to confirm that it is still currently for sale. However, I do know that probably means they are not in a rush to sell and therefore a great deal is unlikely to be had. I appreciate the advice to try getting into contact with the owner and I will also be looking around for some other possible options.

Thanks!

[mpbaker22]

I had never heard about that 1-2% general rule, I'm learning stuff already! I have gotten into contact with someone on it to confirm that it is still currently for sale. However, I do know that probably means they are not in a rush to sell and therefore a great deal is unlikely to be had. I appreciate the advice to try getting into contact with the owner and I will also be looking around for some other possible options.

Thanks!

Are there still tenants in it?  I'm trying to think like the owner.  His home address is in California, I believe (I might be wrong).  Perhaps he/she doesn't want to continue managing it but is making money from tenants.  This would allow the owner to wait for the right deal to come along.

The 1% rule is a fairly standard way to weed out properties.  I personally believe there can be good deals found at less than 1%, but I'll never find them because I use 1% to filter those out of my view.

Actually, to be exact, I look for .5% as I'm living in the other half ;)

[crhart0807]

Yes I do believe there are tenants at the property. My assumption is that it is fully leased at the moment, thus why the owner is probably in no rush to sell.

There is another for sale http://www.zillow.com/homes/for_sale/duplex_type/28927176_zpid/days_sort/32.878938,-97.104979,32.790666,-97.243681_rect/12_zm/_fm/ it seems priced high, however if a deal could be struck it seems like a better buy. However that is all speculation as I have no hard facts from any source. It looks like the best option for me is likely to rent for awhile and save up for a larger down payment which would give me more options.

Thanks

[Another Reader]

Stop looking at Zillow.  Half of what's on there isn't actively for sale.  Start reading up on income property investing, using Arebelspy's book list.  Attend your local real estate investor's group meeting.  Attend a couple of different group meetings, if you are in a large urban area.  Look for agents that represents buyers of income properties in the area.  Schedule a meeting with one or two of them and ask lots of questions.  Get the names of some lenders that finance income properties and talk to them.

Once you have done all this, you should be ready to start looking at properties.  By then you will have a larger down payment saved and a little more confidence in what you are doing.