I recently concluded a transaction for a client looking for investment property to purchase. I thought I would run through this property scenario so you can see what kind of opportunities are in the marketplace.
I found the seller of this property while prospecting. She was a real estate agent from Salt Lake City who had purchased this triplex back in 2007 for $102,000. Despite being an agent, she had not yet listed her property for sale.
Her asking price was $109,000. Rents were disclosed as $425, $425, and $450 initially. Since the multi-unit market has been decimated by a lack of reasonable financing options, I asked the seller if she would participate in seller financing. She agreed to do so.
We offered the seller full price, a 10 year balloon, a monthly payment of $658, and with 10% of the purchase price down. This was all subject to her existing mortgage. Fortunately, she put 20% down when she purchased the property so we didn't find ourselves upside down with our new "wrap" mortgage. After a minor interest rate tweak she basically accepted these terms.
After our due diligence, we discovered the rents were really $325, $425 and $425. One of the units didn't even have a written lease. At this point, my buyer balked and excused himself from the transaction. Despite the lower rents, the building was still wildly profitable. Here is what kind of money my first buyer walked away from:
Not a bad return considering how low the rents were. I immediately presented the property to a more seasoned buyer. He closed on the property three days later.
The new buyer plans to raise rents to about $500 per unit. He is also going to make the tenants pay their own utilities. Here is the new buyer's profitability after raising rents to market levels:
The new buyer has about 80 units under management. Make that 83 now. And all this is possible because of seller financing.
Looking for an investment property with cashflow? Give me a call.
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