Author Topic: Is it the lifetime deal or not?  (Read 1671 times)

more4less

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Is it the lifetime deal or not?
« on: December 02, 2013, 07:12:21 PM »
About me: I'm new to RE. I have good job, excellent credit history and some cash saved more than enough for 20% down plus some investments which I'd rather not touch.

About property: It's less than 100k, it's 4-plex with all units rented out bringing about $1900 per month (GRM<5, yay!). Looks like working class neighborhood in a big city. Property might need some maintenance.

The catch: place is 2000 miles away. If the property were at least 500 miles away, I'd buy it in no time. Also, I'm slightly worried about tenants' quality.

Questions:
0. Is it the lifetime deal or not?
1. How do I get mortgage for out of state property?
2. How hard is it to manage out of state property? Most likely I will hire a manager for this. Would love to hear your experiences.
« Last Edit: December 02, 2013, 07:17:22 PM by more4less »

arebelspy

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Re: Is it the lifetime deal or not?
« Reply #1 on: December 02, 2013, 11:26:21 PM »
There's a saying in real estate: "The deal of a lifetime comes along about once a week."

That being said, no, this is not necessarily a screaming deal (doesn't even hit the 2% rule often used for small Multifamily).

It could be a deal or not depending on a number of factors.  First, you start it "may need some maintenance."  Better figure out exactly what it needs in rehab costs.

You should also figure out the ARV, and see how it compares to other properties in the area.  If they're all going for 80k, this obviously isn't a deal.  You also need to find out what the rental comps are (is it at, above, or below market).

Most important you need to find out about the area, both the city itself as well as the exact neighborhood.  Who will your tenants be?

It being out of state, how are you going to manage it?  You mention you will "most likely" hire a manager.  That's kind of a crucial aspect, and I wouldn't purchase an out of state property without having a good team lined up.

Lots to think about.  A mortgage, if you have less than 4 right now, should be pretty easy to get, a 4-plex is the same category as an SFR, and if your DTI and credit score is fine, you should be able to qualify for a traditional loan.  Only hitch is if you have no rental property experience, some banks not might like that, but you should be able to find someone to underwrite it.

The mortgage is something to start shopping around for, but you have a lot to research and think about with the property, as well.
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Johnny Aloha

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Re: Is it the lifetime deal or not?
« Reply #2 on: December 03, 2013, 10:06:54 AM »
In addition to ARS' comments above, you need to find out what (if any) utilities the owner pays.  That will eat away returns very quickly.

_JT

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Re: Is it the lifetime deal or not?
« Reply #3 on: December 03, 2013, 07:08:42 PM »
For reference, I received an email today from a local guy about a property less than a 100 miles away from where I live. 4 plex, listed at 109k, and all rented for a total of 2900/month. The place is a large, chopped up house, which will also probably have higher than normal maintenance costs, and is far enough away that I'd use a PM. Owner also pays utilities/taxes/pest control to the tune of ~900/month, which means the numbers are really close to your deal of a lifetime.

I am not giving it serious consideration. Although perhaps I would if I wasn't tracking on some good SFRs right now.