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Honeynut Cheerios Urine
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Discussion Starter #1
Ok..so I went and looked at an investment property today. It is divided into 3 non-equal size portions. Overall square footage is roughly 2500. The lot is about 1/4 acre size i'd say. The back 1/2 of the lot is rented out for 250$/mo for storage and parking for the tire store next door, big implement tires, wheels, etc. The west end is big and rents for 475+utilities, the middle is small and rents for 300 utilities included, and the east end rented for 485 utilities included but noone is currently in.

The middle/west end are currently occupied and have 12mo contracts, middle guy has been there for years with insurance company and other end is mexican store that sells mexican spices, mary kay products..sorta like a vato express. Mexican store just started their 12mo contract and middle guy is in the middle, but probably not going anywhere.

Income generated would be 475+300+250, so 1025 a month. Utilities for the non-rented side plus middle would run roughly 100$/mo. I had been looking for a place to rent or buy locally for my disabled brothers (whom i care for) to have a showroom/work area to make their arts and crafts which we are selling. Sort of let them run their own business, have their own store! My mom was also looking for a place as she makes her own spices and bath and body soaps, etc, etc. She is really needing a local storefront place to help her business go along. I had been looking for a business big enough to be able to offer slots open to consignment to bring a little extra $$$ in.

This location is good, down a main drag right off another. Highly trafficked, not a ghetto location, etc. The asking price is 89,000, so could probably get for 85. If I got it for 85,000 assuming 7.0 interest rate and 20 year loan, it would be roughly 650$/mo. This would net roughly 300$/mo not including any profit/consignment for the other store, with little financial risk in opening up my brothers their own store+consignment.

I had heard that business loans normally go for about 1% higher than a home loan, and are normally shorter, such as 20 year loan instead of 30. That is why i put the 7.0/20yr loan figure in.

This seems like a financially smart move. I talked to the insurance agent who has been there for years, roof is a little old but doesn't leak, it leaked a bit 2 years back and it was all patched, no leaking in either of the 3 since.

Anyone have any insight? Things to lookout for? I would consider buying it if I could "break even" just to expand my day and residential program i currently provide for my brothers (similar to group home) and have a place for my mom to do her stuff. With this setup she could not pay me any rent but just work the store a little bit on a saturday when she's making spices and such, as well as clean the shop, organize, decorate, girly stuff, etc. The fact that I would be making money monthly while still gaining this space is a sweet deal, as most spots this size and location rent for what this one currently would cost (485/mo). Gaining equity in it as well as netting a profit would be nice...

I checked USAA's website and didn't notice anything about an investment property loan. I was too busy today to call anyone about tax issues or asking about a loan option. Any insight or opinions welcome :thumbup
 

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I'd probably do it if the building is in decent shape, but ONLY if you can afford to make the payments without the income.
 

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Honeynut Cheerios Urine
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Discussion Starter #3
I'd probably do it if the building is in decent shape, but ONLY if you can afford to make the payments without the income.
Building was built in the 50s and is in decent shape, roof isn't bad..etc. Not a "fixer upper". I would have it inspected prior to purchasing if I do pursue it. Payment wouldn't be an issue, as I have ample income, but it is nice to find a property I can make income or break even on compared to renting or buying one and having extra expenses each month.

Going to check with my local bank i normally go through tommorrow...
 

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Since this is an investment property you are looking to buy I would determine the estimated value based upon a cap rate. http://www.invest-2win.com/caprate.html Determine your NET Operationing Income and divide it by the rate of return you would like on your money. The link helps explain.

A local lender is usually the best source for investment property. The rates will typically be about a 1% higher (I just purchased a place and the rate was 6.65 for 15 year) and you may be required to have a higher downpayment 25% instead of 20%. A local lender will usually have less restrictions.

Go to the courthouse and look up the public records on the property. Some states will provide the sales history. Also check out assessed value. (Don't consider assessed value a fair indicator of market value)

An additional advantage you can consider is some tax advantages. Writing off expenses assocatied with the building.

Good luck
 

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Honeynut Cheerios Urine
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Discussion Starter #5
Since this is an investment property you are looking to buy I would determine the estimated value based upon a cap rate. http://www.invest-2win.com/caprate.html Determine your NET Operationing Income and divide it by the rate of return you would like on your money. The link helps explain.

A local lender is usually the best source for investment property. The rates will typically be about a 1% higher (I just purchased a place and the rate was 6.65 for 15 year) and you may be required to have a higher downpayment 25% instead of 20%. A local lender will usually have less restrictions.

Go to the courthouse and look up the public records on the property. Some states will provide the sales history. Also check out assessed value. (Don't consider assessed value a fair indicator of market value)

An additional advantage you can consider is some tax advantages. Writing off expenses assocatied with the building.

Good luck
I'm checking out that link, and i'm checking with local guys tommorrow that I have my home loan through. Thanks for the insight/link :rockon
 

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At least all the ones I've looked at around here have been requiring a higher down payment, the bar i was going to buy required a 40% down. f- that
 

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Honeynut Cheerios Urine
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Discussion Starter #7
At least all the ones I've looked at around here have been requiring a higher down payment, the bar i was going to buy required a 40% down. f- that
gheezus, that's a hell of a lot! :shocked

Talked to the bank this morning..they're gonna go over the financial statement/income, etc and decide what I would need to provide cash wise for a down payment or collateral. They do all loans in-house, so that's one advantage. And...looks like roughly 7% interest and 15-20year term
 

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I'm certainly enjoying the extra income from my investment property, and so far the tenants haven't been too much of a headache.

Best of luck closing the deal.
 

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Honeynut Cheerios Urine
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Discussion Starter #10
I'm working on a business plan/cash flow statement/income tax paperwork required for the loan, found an accountant who has dealt with my type of business (day and residential services for adults with disabilities) so he knows the ins and outs of things, and also has a daughter who is disabled and whom my mom is the child's case manager for services. Small world I guess, but he should give me the most personal service and also know all the deductions as well as how to classify things since my income is a lil different than most.

Hopefully things work out..probably should know within a week once I get all my paperwork completed
 

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i agree wiht mike. only buy it if you can pay the whole payment without the income of the renters. never ever depend on them to pay it on time to you. if you can, then i'd say go for it
 

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Honeynut Cheerios Urine
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Discussion Starter #12
i agree wiht mike. only buy it if you can pay the whole payment without the income of the renters. never ever depend on them to pay it on time to you. if you can, then i'd say go for it
That's not an issue..payment would be roughly 600/mo. And...they're in 12mo contracts, one has been there for 3-4 years renting...probably not going anywhere tomorrow. I'd be using 1/3 of it to expand my business. Just makes more sense to have the investment and have 0 overhead for my expansion, than pay rent, or buy a complex with a 3-400$ payment and have that extra overhead...hopefully it'll all work out :thumbup
 

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I'm a loan officer at First Financial Mortgage Corp.

IMO, now is an excellent time to buy any property, but especially investment property. If you can break even on the monthly expenses and are willing to own the property until the real estate market's cycle swings back up, there is tremendous money to be made. Prices are artificially low because the market is flooded with foreclosures. I'm snapping up as many properties as I can right now, and so is everyone else that can tolerate dealing with the hassles of tenants and maintainence.

I worked with many people in the Southeast over the last 10 years that made millions on investment property appreciation. These guys were breaking even or just a little positive flow each month, but the property's values went up dramatically over the years. Many sold at the peak of home values last year, cashed out, and have started buying again.

I've been in residential mortgage lending for 11 years and I'd be happy to answer any loan related questions you have.

(for example, if you have decent credit, you can definitely get a 30 year fixed rate loan on investment properties, that is if you want that long of a term. Our rates today for this program are 6.3-6.5% depending on exact credit score. You also need at least a 10% down payment for investment property loans, if you want a conventional loan, aka not sub-prime!)

Good luck and welcome to the investment property club! :chili:

---Jason
 

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Honeynut Cheerios Urine
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Discussion Starter #14
Closed on the property this morning, it's profitable as it sets currently with 2/3 of the building rented, and the back lot, so that's nice! Ended up getting doing a 5year loan locked in, with a balloon payment to refinance in 5years again, instead of having a continually variable rate loan.

Funny story. So, the owners of the adjacent business/building, a tire store, rent the back portion of the paved property to store tires/wheels for co-op/big rigs, etc, etc. They even have a semi trailer full of crap on there currently. Anyways, they obviously weren't aware that the building was for sale, and they'd save a bunch of money by buying the whole property instead of renting each month. Last night, ~12 hours before our closing, they called the sellers and offered them 5000$ more than what was in our contract and they'd write them a check. So, they sellers called the realtor to see if they could get out of the contract, lol. Stupid asses, and I'm kinda pissed off that they would try to back-door me like that. A contract is a contract, and real-estate contracts are there for a reason, protecting both parties. That's ok, currently they're setup on a month-to-month basis. April 1 I could tell them they have to move their semi trailer and (my guess) 100,000 of property off the lot if I feel like it. I'll have them sign into a contract, at minimum 6mo, but may feel out the owner and see how big of a deusch he is...they wouldn't be hurting to pay an extra 100/mo.
 

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If they were willing to pay 5K they might go to 15K. Offer them the property for 15K over your purchase price and they pay all closing costs. Take that 15K and find another place. You could probably locate another deal pretty quick and possibly at a better price.

If they back out hand them their new lease.:thumbup
 

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Honeynut Cheerios Urine
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Discussion Starter #16
If they were willing to pay 5K they might go to 15K. Offer them the property for 15K over your purchase price and they pay all closing costs. Take that 15K and find another place. You could probably locate another deal pretty quick and possibly at a better price.

If they back out hand them their new lease.:thumbup
If they offered 15k more I might take it, but to be quite honest it's worth quite a bit with its location and the fact it brings in income without one section rented, which I will be utilizing/opening up for my brothers+other craft consignment. It accentuates my current business, so, not a bad deal at all...still pisses me off they tried to back-door...we'll see how the month-to-month rent treats them.
 

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That makes sense. I wouldn't put much thought into the "back door deal". They really had no other way to approach it since it was already scheduled for closing. The morons were the previous owners.
 

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Honeynut Cheerios Urine
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Discussion Starter #18
That makes sense. I wouldn't put much thought into the "back door deal". They really had no other way to approach it since it was already scheduled for closing. The morons were the previous owners.
Yeah....i talked to the previous owners of the property, and i got them to slip up and mention that they tried to back-door the contract. It wouldn't be a big deal if they would have said "call us if something falls through"...the previous owners were sorta morons, so..I can't really fault them as much. A business owner/investor knows how things work...
 

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Honeynut Cheerios Urine
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Discussion Starter #19
Snapped a few pics yesterday. Just starting to pull things out of storage, etc to get things setup. Won't be a bad setup, may look at getting new carpeting, as it's not in the best of shape, but not horrible.

all the pics here:

http://www.supermotors.net/vehicles/registry/17743/63285




-Next to 2 businesses which have been there for quite a few years, good neighborhood.



Lot is pretty good sized, and building is ~50 ft out of flood zone so no flood insurance :rockon.




They got alot of crap back there....quite a bit, and there is a bit of a mess of bands from unloading stuff, offloading pallets, etc. Will definitely be discussing a deposit/contract with the owner. Big issue is liability if any of those goods are stolen, quite a bit of $$$ there I wouldn't want to accept damages for left out in the open.


Has a good sized "shop" area, with 2 back rooms for working/storage. Has a bathroom and decent storage room. Not too shabby :beer
 

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How did it ever work out with the owner of the tireshop?
 
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