Well the search continues, but I am learning a lot. I figured since you guys seem to be interested in this as well I would post the deals that I find that seem to be good. Here is the first property I found where the numbers *seem* to work:

8 unit apartment building:
Asking $475,000
MLS#N239265
Six one bedroom @ $700 a month.
Two two bedroom @ $800 a month.
Assesed value $163,310 @ 42.53 (Mill Rate)=taxes $6,945

$5,800 a month rent x 12 months=$69,600 a year.

Cap rate=14.6
GRM=6.8


My impression; this property is on Blake street in New Haven. Right next to SCSU and in a crappy area. Not the kind of area I want to be a landlord of personaly. But it is a good example non the less. It actually looks real clean, has recent vinyl sidding and windows. Owners name is withheld from the MLS listing. If it was a few streets over it would be a home run(I think).

Now here are my questons:
1. I talked to a mortgage lender and she said that while primary residence loans are cake, stuff like this is commercial and a different ball game.

So what types of financing and rates can one expect?

2. The best way to own stuff like this is through an LLC. But the catch is loan terms are crap for properties like this if you buy them through an LLC. I keep hearing 20% down. But you can buy them personaly(better terms) then role into an LLC, which will work as long as you don't get caught.

Anyone know the types of financing for property like this where me the investor only has to put up 10% or less?

See 10% is $47,500 of my money, so with the income this place should produce it would take probably about 2 years for that money to be returned to me. Anyone know of a way to increase this rate? To like under a year?

3. What other costs and calculations should I perform? I am looking to put together a sheet of formulas that I can plug these deals into. I have some more advanced stuff in a book somewhere I will dig out tomarrow and crunch some more numbers.

__________________
1999 SL500
1969 280SE
2023 Ram 1500
2007 Tiara 3200

I am still a newbie when it comes to this stuff but you have to factor in a lot of other expenses. Insurance, property taxes, building improvements, maintenance costs and who is going to unclog drains at 3:34Am in the morning Most of the properties have about 50% down give or take to make things worthwhile factoring in all the increased or in some cases negative accrual of equity because you do mention it's in a rough area. And that may be the seller's reason for selling. I think at 10% you'd be too heavily leveraged and might get into trouble with that. I think you might consider something smaller that is undervalued buy it and then see what sort of rents you can raise it up to.

__________________
1974 240D 3.0L 4(M) - 250K -OM617.910 + 300D FW + Rajay turbo power!
1977 6.9 3(A) - 84k

You'll want to investigate the insurance thing right away. In crappy areas some insurer's won't touch it. The others will charge a high premium.

In any case, as a rental property owner, I am looking for something that can reliably return 7% annually to my pocket. Otherwise it's not worth the hassle. The property you describe could be a good one, but much is unknown, and debt service can really fry up the return.

It is a problem to borrow money as a LLC, as you describe. One solution is to seek out properties wherein the current owner would be willing to sell it on a contract basis. This can be possible in areas that aren't so good, and where they are motivated to sell. If you have enough money to put down, it can be attractive to the owner, since if you can't make a go of it, he gets to sell it again.

__________________
DS
2010 CL550 - Heaven help me but it's beautiful
87 300D a labor of love
11 GLK 350 So far, so good
08 E350 4matic, Love it.
99 E320 too rusted, sold
87 260E Donated to Newgate School
www.Newgateschool.org - check it out.
12 Ford Escape, sold, forgotten
87 300D, sold, what a mistake
06 Passat 2.0T, PITA, sold

Las Vegas NV

You have to be careful with a statement like this one. Not to be unkind, but if you invest a down payment in a property, it's still yours, all the way through.

You also refer to "the income this place should produce..." The term income, when involved in the landlording business should only ever be used to describe the money you have left after all expenses. Gross revenue minus expenses=net income.

And frankly, if you can afford only 10% down on an investment property, you'll most likely have trouble making a go of it unless you have other significant cash in reserve. I wouldn't even think of buying something like that unless I was able to put down 25 or 30 percent.

I found in the beginning that the apartment building ownership game was harder than I thought. However, it's been rewarding. And there are lots of people out there doing it who can help you along with good advice. In particular, a good real estate agent, if you can find one locally, can be a real asset.

__________________
DS
2010 CL550 - Heaven help me but it's beautiful
87 300D a labor of love
11 GLK 350 So far, so good
08 E350 4matic, Love it.
99 E320 too rusted, sold
87 260E Donated to Newgate School
www.Newgateschool.org - check it out.
12 Ford Escape, sold, forgotten
87 300D, sold, what a mistake
06 Passat 2.0T, PITA, sold

Las Vegas NV

Have you seen this site?

I have found it very helpful for my landlording questions and other RE investments.


http://www.thecreativeinvestor.com

__________________
1994 C 280 117.5k, White (Good as new)
1997 Toyota Camry 149k Miles (Not so pretty anymore)

1990 190e 2.6 95k (Sold-Should not have)
1981 240d Stick ??? Miles...sold

I couldn't agree more with what dlssmith said.

No way you take 47K out of that place in the next two years, and if your worried about the down payment, your undercapitalized.

I've seen your threads on this subject and its obvious your passionate about this. That's a good thing. Why don't you start smaller with a fourplex to get a good taste of what it is to be a landlord? Over time you can still make money at this level,gain experience, build contacts (a good plumber) and hedge your risk a bit relative to the deal your talking about.

Your on the right track but don't stretch yourself too much out of the gate or you may never see the finish line.

good luck

__________________
1993 300E
1999 E320 Estate

What is the vacancy rate and will they supply a Profit and Loss statement?

You also missed factoring in a hugh tax jump. If the property is currently taxed at an assessed value of $163K for $6K+ in annual taxes, if you buy at $475K, guess what your assessed value will be.

__________________
Mike Tangas
'73 280SEL 4.5 (9/72)- RIP
Only 8,173 units built from 5/71 thru 11/72

'02 CLK320 Cabriolet - wifey's mid-life crisis

2012 VW Jetta Sportwagon TDI...at least its a diesel

Non illegitemae carborundum.

Good post.
It's nice to see some share their info with others, I like it.

Curtis and dlssmith are right on the mark.

You don't have a Cap rate anywhere near 14.6.

Here's my numbers:

Taxes: $6945.
Insurance: $3000.
Maintenance: $4500. (assuming that you do some work yourself......otherwise more)
Vacancy: $5500.
Utilities: $5000.

I come up with a Cap rate of 9.4% based upon the asking price.

If you step into a large commercial property for the first time, without any significant assets, you're putting 20% down........no way around that one. So, keep saving those coins......for this deal, you need $95K plus closing costs..........the books don't tell you about that little tidbit.

In the old days, you could get the seller to hold paper under the table. But, today, the banks require the seller to sign a statement that there is no additional financing. You simply can't pull it off anymore.

And, with rates typically in the 6.5% range, you aren't going to pull much money out of the property with a cap rate of 9.5%. Any major expense........which you won't be able to tackle yourself, will really hurt.

An 8 unit residential property is not something that a 19 year old with no assets should be considering as his first purchase.

PMI is quickly becoming a thing of the past, most A loans that go over 80% are rate and term 80-20 80-15-5 or anything else under the sky. Interest only is also becoming popular for investment properties the will be flipped within 10 years.

Huh?

Don't know about Conn. but not the case in NJ. Unless they reval. the entire muni. etc. -- Unless the muni has a hard-on for the seller, then they can try and do a reverse appeal (where the town steps up and singles you out. Then naturally, they need to single out the rest of the town with the same situation.) -- The taxes on the place seem low. I don't think you'll get hit right away with a property tax jump, but down the road you will. At that point you have to look at what the market will bare in terms of rents.

I can say that right now, at least in NJ, you simply can't make any money in resident. RE renting if you buy and borrow at the current prices and rates. It just isn't there. At times you can buy distressed junk, fix it and then MAYBE make some money... MAYBE 5%. I have yet to see anything where you can buy it for 20% down and walk away with in-your-pocket of over 5%... which is a suckers bet since

a) I say the prices are going to come down.
b) You can put the money in a friggin Saving Account and get almost 5% with now risk and no work.

Now... commercial property... that's where you SHOULD be looking. Read up on how commerical leases work and you'll see why I say that. Almost ZERO headache with commercial, and the tenant pays the taxes, etc.

I have had a FEW guys buy a piece of land that had environmental issues, then build a 4-8 plex resident. complex on it and make money. Naturally one of the guys does environomental law for a living -- so that's the catch.

Think about it. If a building is making a guy money, say 10% a year after all is said and done, why the hell should he get rid of it??? There just isn't any point. Even if the guy is old and stupid, he can hire a maint. company (which, trust me, is something you want to avoid) and still make a decent nickel on the place.

Keep looking.

Pete

Then make the extra payments, its perfect for months that cash flow is low due to repairs, vacancy, red tags, tornado's whatever. In any case its a good option for tax purposes.

I hae to agree yet again with MM (can you believe it!?) Folks have been giving interest only loans a lot of bad press. But what people don't realize is that you are free to pay it down as much or as little as you want.

I have a 30 year on an 8 year track. Was a stupid for not taking a 15 year and paying a lower rate? Maybe. But I have the option to pay much less than I do - and in my line of work ***** happens. I may not always be able to pay as much toward principal as I do... so I pay for that "cushion" in the form of the rate difference between 15 and 30 (which wasn't all that much in my case)...

Interest only can be a great tool if you want to keep as much free cash on hand as you can... just remember the obvious. Your principal isn't going to go down!!!

The upside is if you can sell it for more than you paid, you just made money without spending it!

Pete

You applying all the payment to interest so that you are out in front of the interest??

If you use the extra payments for principal reduction, there's no tax benefit.