Author Topic: Real estate investment letting me potentially FIRE...and you too?  (Read 1704 times)

hoping2retire35

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Coming back from the beach today and I see a sign in front of the apartment complex that is down the road from our house that is (not going to lie here) in shambles with a for sale sign out front. There about 50-60 units in the development and they are asking $350,000.  I can see on the tax records that they only paid $500,000 in 2008, so this is a little surprising but not obsurd.

The few times I've driven thru there it seems like it could be a decent place but there are some burned out units, the cops go in there at least weekly, I have heard and heard of drive by shootings, and would guess the occupancy rate is almost irrelevant. Just one unit should rent for $500 which means 4-6 units would pay the mortgage depending on the term, interest rate, amortized or not, and down payment.

It is also surprising that it is near a college town, near a major interstate, lots of industries in the area, however it is the bad part of (our small) town.

I am curious about others out there who have managed a similar property. How long has it taken to change the perception and get all new tenants? I know evictions can be time consuming but it looks like the place just needs to be cleaned out before anyone would be willing to move in. Are traditional commercial property loans available for a development like this or could I seek a loan shark (is that the proper term?)?

Managing this myself is not intimidating. When I grew up my family managed about 40 rough units. Now they have around 200. I have http://forum.mrmoneymustache.com/real-estate-and-landlording/what-to-do-about-a-late-payment/ a unit but it is a different clientele.  I would be willing to manage it for a reasonable fee for some interested investors or potentially take out a loan for some fair terms. If nothing else it would be nice to just clean up the neighborhood.

Stories,  advice, and terms wanted.

hoping2retire35

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Re: Real estate investment letting me potentially FIRE...and you too?
« Reply #1 on: July 05, 2016, 07:57:01 AM »
Grossly miscalculated, there are 120 mailboxes. Also checked the taxes, $60k a year just for property taxes.

Another Reader

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Re: Real estate investment letting me potentially FIRE...and you too?
« Reply #2 on: July 07, 2016, 08:40:44 AM »
In your shoes, I would call your family and discuss the deal with them.  They can help you evaluate the investment and suggest ways of financing it.  The first thing you are going to do is talk to the Assessor about getting the value and the taxes reduced.  Heck, they may be several years in arrears because the income wasn't there to pay the taxes.  If there's a mortgage, it may be in default as well.  There are probably code violations, and the City may be involved.  Time to do some research.

What is the land worth?  Maybe you can bulldoze the buildings and make a profit by reselling the land....

Kroaler

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Re: Real estate investment letting me potentially FIRE...and you too?
« Reply #3 on: July 14, 2016, 10:14:46 AM »
I'm always curious how previous owners allow money making assets to get to this condition. 

arebelspy

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Re: Real estate investment letting me potentially FIRE...and you too?
« Reply #4 on: July 18, 2016, 05:59:57 AM »
The cost is not going to be in purchasing it, but rehabbing it.  You may only pay 300k to acquire it, but then you'll need to spend a bunch rehabbing it.  120 units x, say 20-30k/unit, you could be looking at 2.4-3.6MM in rehab costs (WAG, since I have no idea of the area, work needed to be done, etc., but that's a not uncommon range for low end units in a large complex).

The owners might be in the position to just want you to take the liability off their hands for $1 (and you pay the back taxes) and it still might not be a good deal.
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iamlindoro

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Re: Real estate investment letting me potentially FIRE...and you too?
« Reply #5 on: July 18, 2016, 09:26:33 AM »
I'm always curious how previous owners allow money making assets to get to this condition.

Undercapitalization.  A couple of times a week in this forum, we caution people planning to put zero down on a property that they're absolutely certain is in a highly desirable area, will never be vacant, and won't need significant repairs for years. Moreover, the same people often have little in the way of cash reserves.  It's a recipe for a major disaster when the unexpected occurs.  That's not a knock against those people, it's just a common mistake.  When people without adequate cash get into trouble and are put in the position of choosing between paying their own mortgage and properly caring for a rental property, the rental property usually loses.