4 plex as a primary residence

[maginvizIZ]

Hello.

So I'm 30 years old renting a room out of my parents basement.  Perfectly fine relationship with my parents... But I'm ready to move on.

I've always wanted to buy real estate and give it a try.  I've been looking at RE for 6 years now (doh! Should have bought then).

https://homes.ksl.com/listing/40441038

For sale by owner, 4 plex (2 bed, 1 bath) in a nice city (Farmington Utah, lots of nice mormons).  This is not a shit hole (but lets be real, it is a 4 plex from the 70s). Most 4 plex's I see in utah are in sketchy areas. Not this one. Nearby other houses, not multi units.

unit 1: $940 (1 year lease)
unit 2: $940 (6 month lease)
unit 3: $890 (mtm)
unit 4: $750 (mtm).
total: $3520.

Using a redfin calculator: $710 @ 5% is $3550 a month.  At 20% down, $2,696.

Curious what your thoughts are on this property as a first rental.  In this market, I'll probably never get a "killer" deal, but I do want to start getting involved.

If you threw an offer at this house, what would you do?

Any tips of advice is appreciated.

[maginvizIZ]

To add: I see a basement apartment going for $1045 (same sq. ft @ 900, built in 60s).

https://www.rentler.com/places-for-rent/ut/bountiful/816-w-4100-s/5723114


Duplex unit going for $950 in clearfield.  Clearfield isn't the best area.
https://www.rentler.com/places-for-rent/ut/clearfield/810-w-300-n/4774261

$1k in clearfield as well.
https://www.rentler.com/places-for-rent/ut/clearfield/17-s-1450-w/5925964

$1.2k in clearfield. It looks recently remodeled.
https://www.rentler.com/places-for-rent/ut/clearfield/31-w-1600-n/4991398


I feel like the units could go for $1100-$1200.  I might be a tad optimistic... 3 of 4 units are remodeled in the last 3 years.

Not the best deal in the world... But a good enough one for me to swing?

[waltworks]

I mean, $710k for $3500 gross rent is unbelievably terrible. For a multi (usually more work/less appreciation) it's even worse.

The fact that anyone would even consider this is pretty shocking to me, but we're in uncharted territory (well, ok, it was charted once before in 2007) on RE prices.

If you want to get out of the 'rents house, I'd just go rent an apartment. This is a terrible time to buy.

-W

[PMJL34]

Sorry OP, looks like an all around terrible investment.

At best you are bringing in 4k/month. Your monthly carrying costs are going to be about/more than 4k (at your 5% down), not including utilities, vacancies, or repairs. This is with all 4 units rented.

You said you've been looking for 6 years. If so, you should be able to tell from a mile away this house is no good. Perhaps you can do more reading to better understand what makes it a good deal or not.

Don't get discouraged. Best of luck!

[lexde]

I wouldn’t even fully underwrite this one.

I mean, you could for practice, but it would be an exercise in futility.

[Dee_the_third]

You know the 1% rule right? Monthly rent should be 1% or purchase price or more.

This rule gets squishy if you're in a rapidly appreciating market, which I don't think applies here.

A better option: buy a small SFH, get roommates and see if you can get them to cover the mortgage with their rent.

[Papa bear]

I mean, $710k for $3500 gross rent is unbelievably terrible. For a multi (usually more work/less appreciation) it's even worse.

The fact that anyone would even consider this is pretty shocking to me, but we're in uncharted territory (well, ok, it was charted once before in 2007) on RE prices.

If you want to get out of the 'rents house, I'd just go rent an apartment. This is a terrible time to buy.

-W

Ctrl C

Ctrl V 


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[affordablehousing]

Note it's a FSBO. When the owner comes back to earth in a few months he or she might be better able to negotiate. But there's no reason to bite on a FSBO after 3 days of listing.

[waltworks]

UT real estate is white hot. They'll probably sell it at or over list.

Do I sound cynical? LOL.

-W

[srad]

I also see owner is willing to carry the note.  2.5% with 15% down or 2% for 20% down, 20 year contract.  You have him amortize that over 30 years your PI payment would be 2100, then you'd have a balloon payment of about 225k in 20 years.

Not saying this is a great deal but the 1% rule came out when dinosaurs roamed the earth and the interest rates were over 7% (or you are buying in A, a real sh1tty area or B, the rust belt where property values don't move up).  With rates at 2% you get close to a .7 and its a pretty good deal. Not sure how under rent you are but the place looks nice, So if you are able to get closer to 5k in rent and if this is a class A property?   710k purchase, 5k in rents on a 2% note (especially if you have owner amortize it over 30), in a highly appreciating area?  I've seen worse.

[Papa bear]

I also see owner is willing to carry the note.  2.5% with 15% down or 2% for 20% down, 20 year contract.  You have him amortize that over 30 years your PI payment would be 2100, then you'd have a balloon payment of about 225k in 20 years.

Not saying this is a great deal but the 1% rule came out when dinosaurs roamed the earth and the interest rates were over 7% (or you are buying in A, a real sh1tty area or B, the rust belt where property values don't move up).  With rates at 2% you get close to a .7 and its a pretty good deal. Not sure how under rent you are but the place looks nice, So if you are able to get closer to 5k in rent and if this is a class A property?   710k purchase, 5k in rents on a 2% note (especially if you have owner amortize it over 30), in a highly appreciating area?  I've seen worse.

I hear about these seller financed, buy a house with other people’s money options, but have never seen it in the wild.  Is this realistic?  Shit, my mom had a set of real estate tapes and VHS from the early 90’s on that strategy.

Not that the math doesn’t work out.  If you can make it happen, do it. 

The 1% rule is meant as back of napkin math.  Changes in interest rates, HOA/condo fees, high taxes, deferred maintenance, etc change your calculation. 


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[theoverlook]

Note it's a FSBO. When the owner comes back to earth in a few months he or she might be better able to negotiate. But there's no reason to bite on a FSBO after 3 days of listing.

It says it's in contract now.

[PMJL34]

LOL wild!

Maybe it's OP who's in contract with the seller :)

[maginvizIZ]

I offered $725k ($15k over asking price).  I had no realtor, so I was saving him the 3% ($22k).  I lost.  He didn't tell me what it went for.

Utah is smoking hot right now.... Actually Utah has been smoking hot for the last 5 years.


Cheers everybody.  I'll continue to rent. Gonna keep this post so I can laugh at myself 5 years down the road when the 4 plex is worth $1.2m.

[Archipelago]

I offered $725k ($15k over asking price).  I had no realtor, so I was saving him the 3% ($22k).  I lost.  He didn't tell me what it went for.

Utah is smoking hot right now.... Actually Utah has been smoking hot for the last 5 years.


Cheers everybody.  I'll continue to rent. Gonna keep this post so I can laugh at myself 5 years down the road when the 4 plex is worth $1.2m.

Be glad you didn't win the bid because it's a terrible deal. And save this post for when the next downward cycle happens and the house is worth less than the mortgage balance. :)

[Dee_the_third]

 Don't sweat it, RE is cyclical. When everyone else is falling over themselves to pay too much for bad return, you wait. Money is made when you buy- the price you pay determines your returns forever.