What percentage of your after tax money do you spend on your house note or rent?

[seldomseen]

Would certainly like to know more about this.

Someone I know is selling 4 units in a great part of town getting 3500 rent average on each for 1.2

Would really like to figure out a way to buy them without putting down half my life savings

Not sure i'm comfortable discussing this on here because it would most likely give away who I work for. There are a few ways to do it and any financial advisor worth a lick would know. In all honesty it comes down to how much money you have. If you have enough the lender will make it work.

 

[PatsFan1283]

That's right, 5 is commercial.

4 units might slip under the radar of REIT/private equity but in general it really makes the market a lot more efficient for A level properties.

Cap rates much lower than in years past for comparable property

Low interest rates are great at the beginning of a business cycle but as that cycle matures, it is just another form of subsidization raising costs.

 

[CHOPTALK]

4 units is going to need to be a commercial loan which is a whole different set of requirements than a loan on residential property. Most of the time this is with an entirely different lending arm of a financial institution.

Can't speak to that particular deal and on the surface 170k/1.2M sounds fine but in general multi-family is similar to a lot of other asset classes out there right now in that it is becoming very frothy.

if it really is in a good neighborhood you may also need to move fast. Those REITs/private equity firms are just so well capitalized to move nowadays

Its townhomes. Not commercial property. People live there

 

[PatsFan1283]

Its townhomes. Not commercial property. People live there

People live in commercial property. Multi-family is commercial property. $3500 per month for a townhome in NO? Couldn't someone just buy there and get a way better deal?

On the surface it sounds like a good deal. Has it made its way to the open market?

A deal like that here would go for like 2mill based on cap rates/good area. Probably be a bidding war.

 

[CHOPTALK]

This units are in a large condo type building. Over 100 units total. The same person does not own them all.

Its just 4 units spread out through the the building on different floors. They are not together or anything like that.

There is also $410 a month HOA fees associated with each unit which I find ridiculous. But apparently that's the norm.

 

[CHOPTALK]

It not New Orleans.

 

[CHOPTALK]

I guess the question of this thread is trying to figure out how much leverage is too much leverage.

I live a pretty conservative financial life right now my Debt to income ratio is very low.

This would cause me to get out of my comfort zone.

But I have never done anything like this before and I will be the first to admit I don't know jack shit about real estate

 

[PatsFan1283]

3500 a month for a approx 300k property? You could just buy a few units instead of all 4.

That sounds wrong but every area is different.

 

[CHOPTALK]

As a matter of fact I know less then jack shit.
Im ashamed of that but it is what it is.

And right now I don't have time to get educated On the subject

 

[CHOPTALK]

3500 a month for a approx 300k property? You could just buy a few units instead of all 4.

That sounds wrong but every area is different.

I think that's part of the being a great deal part.

Wants to get rid of it all in one shot.

 

[CHOPTALK]

And can someone explain these HOA fees to me?

I don't see the value .

Water, trash pick up, and landscaping. The units don't have yards. Don't see the value for over $400.

Whats to stop them from raising them to infinity?
What happens if you don't pay them?

 

[Willie99]

And can someone explain these HOA fees to me?

I don't see the value .

Water, trash pick up, and landscaping. The units don't have yards. Don't see the value for over $400.

Whats to stop them from raising them to infinity?
What happens if you don't pay them?

Insurance and reserves for future expenses such as paving & roofing & siding

 

[seldomseen]

And can someone explain these HOA fees to me?

I don't see the value .

Water, trash pick up, and landscaping. The units don't have yards. Don't see the value for over $400.

Whats to stop them from raising them to infinity?
What happens if you don't pay them?

Homeowners association dues. A payment due at a reoccurring frequency for upkeep of the community: master insurance, pool, roads, etc. Nothing you can do to avoid it if you are buying a condo or pud. Pretty sure there would be some sort of legal ramification if you don't pay.

 

[Acebb]

I can't believe what I am reading. There are no lenders that are going to enable someone who is looking to buy real estate for rental units to put $0 down.
It isn't going to happen. If you're looking to buy 4 or more properties you're going to have to put 25% down.

If you don't pay HOA dues you will get sued. When you buy a property in a HOA community you sign a covenant and agree to pay the dues.

 

[Acebb]

This units are in a large condo type building. Over 100 units total. The same person does not own them all.

Its just 4 units spread out through the the building on different floors. They are not together or anything like that.

There is also $410 a month HOA fees associated with each unit which I find ridiculous. But apparently that's the norm.

You're not going to get approved for a loan to buy all 4.

Why not try to buy 1?

On the positive side, the RE taxes, insurance, any repair/upgrade costs, marketing costs, and HOA dues are tax deductible dollar for dollar.

 

[Acebb]

Now if choptalk doesn't go to a commercial bank, he could try a private lender but those would only cover 70%, they're not going to take 100% risk here. If the owner of the unit he is interested in owns it outright he could have the soon to be former owner be the bank and structure a deal to pay him/her.

 

[seldomseen]

I can't believe what I am reading. There are no lenders that are going to enable someone who is looking to buy real estate for rental units to put $0 down.
It isn't going to happen. If you're looking to buy 4 or more properties you're going to have to put 25% down.

This is pretty inaccurate. Your local bank may not but there are plenty that will. If you're buying a 4 unit home its all the same to the lender as if you were buying a single family residence. There are other risk factors they will consider but this is not one.

 

[Acebb]

This is pretty inaccurate. Your local bank may not but there are plenty that will. If you're buying a 4 unit home its all the same to the lender as if you were buying a single family residence. There are other risk factors they will consider but this is not one.

This isn't true at all.

Each residence will have a different address. Each residence will have different square footage, and tax information.

There are no banks that are going to give a guy a million dollars in credit with no money down. None.

 

[Acebb]

But I definitely think chop should find a lender, any lender, to talk to about $1.2 million in rental property about the no money down option.

I hope he does and honestly reports back.

 

[CHOPTALK]

I can't believe what I am reading. There are no lenders that are going to enable someone who is looking to buy real estate for rental units to put $0 down.
It isn't going to happen. If you're looking to buy 4 or more properties you're going to have to put 25% down.

If you don't pay HOA dues you will get sued. When you buy a property in a HOA community you sign a covenant and agree to pay the dues.

This is pretty much what I've been told