Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev | Next
Author: FoolMeOnce Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5068  
Subject: Re: Something for me to think about Date: 8/9/2003 10:39 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 4
mazske writes:

I love the idea of purchasing a rental property. I have toyed with the idea before and my spouse likes the idea as well. When I bought my first house back in '93, I rented for the next 3 years so I do have some experience with being a landlord.

Just for kicks I did a little searching in your area for small multiple unit properties. It appears there are an abundance of 2-6 units properties available. I am jealous. In my area it is either single family homes or large apartment complexes. I was attracted to this listing for a triplex:

http://tinyurl.com/jhyl

Why? Because it is different. There are a number of interesting characteristics about this listing that would make me interested in checking it out. The property may be a total dog, but there is no way to tell without doing the required due diligence.

The first thing I note is that the building appears to be be brick (translation: little exterior maintenance expense).

The second thing I note is that the building has a lot of square footage for the price at 2,920 SF for $124.5K. This is only about $42/SF. I doubt a brick building can be reproduced for anywhere near that price including the price of the land.

Thirdly, the interior floor plan is very eclectic. Many times this spells opportunity for someone with vision. Note the disparity in the sizes of the units. One is 425 SF, the other 2 are 1280 SF. One of the units has 6 bedrooms? Note that there are three units but there are 4 bathrooms. The property is served by a septic system but the area around it appears built-up. This means that central sewer might be available. You might be starting to figure out where I am going with this.

If the zoning allows, this building might be convertible to 4-5 units without too much expense. It already has 4 baths and 10 bedrooms. It has sufficient square footage. Five 2 Br units at $350/month would yield monthly gross rents of $1750. With a 20% down payment the mortgage on a place like this would be less than $750/month. The cash flow would support a fair alteration budget.

Income properties are valued by the cash flow they produce. By adding more units, you not only increase your cash flow but you instantly increase the value of the building. If this conversion would fly, but I didn't have the downpayment, I wouldn't let that stop me. Take in a partner. Try to option the property and sell it to another investor. The possibilities are endless.

Regards,
FMo










Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev | Next

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement