Advice on a property

[jimcurran]

I'm currently looking at a triplex for sale for 199K. They purchased it 1 year ago for 156,500 and have done nothing to improve the property. The gross monthly income is $2260. They have listed expenses totalling $632. (heat-86, water-80, water heater rental-27, taxes-211, insurance-178 and 50 for lawn maintenance). There is no allowance for maintenance, property management or vacancy. The property needs an immediate 30K in repairs. The cap rate seems good almost 10% but they are not including maintenance which i figure at $300, property management at 150, and vacancy at 70. I feel like the price is too high and not having done any improvements doesn't warrant an increase of over 40K.



Any advice

 

[Sherilynn]

Figure out what price works for you considering today's property market, rental market, and expenses, and base your preliminary offer on that number (likely you would discount from that number).



Write a cover letter to go with your offer explaining that you like the property and would like to buy it, but you think that $XXX is a fair offer considering (list reasons).



You may also consider writing 2 offers: one at a discount where you handle all of the repairs after closing, and one closer to their asking price but requiring the sellers to pay your contractor's fee to handle the repairs before closing (so you get a rent-ready property and the reno cost is included in the mortgage).



They may not agree to the second option (or your bank may not), but it also gives your discounted offer more appeal.



Alternatively, you could write your second offer to include 10% of the purchase price in seller financing to help fund the renovations. (So 10% of your own cash down + 10% seller financing to round out the down payment.)

 

[Thomas Beyer]

What province is this ? Big city ? Rural ? Economically vibrant city ? How big is each suite ? Verandas or balconies ? How many bedrooms per suite ? Land size ? Age ? How is it heated ? Rental upside ?

 

[jimcurran]

Ontario, small city (100,000 population), yes an economically well off city, near downtown and riverfront district. There is one 3 bdrm, one 2 bdrm and a bachelor. The 3 bdrm is above average size, and has a deck, shared yard, and its own laundry. The 2 bdrm is above average size,has a balcony, and its own laundry. The bachelor is average and has a deck. All units are painted nice and in good condition.Land is 50x100 and it is heated with forced air gas furnace. Tenants all pay their own hydro (3 seperate meters), home is not air conditioned. I would pay heat which they list at $86/mo and water at 80/mo which I think is low for both. There would be no chance to increase rent for 1 year and all units are in 8/10 condition with only needing maybe a new stove or a little flooring. Home immediately needs a roof repair (2000), new furnace (2300, current one is 30 yrs old), siding and insulation (21000, current leak above patio door, and in upper exterior bath wall), and misc repairs for the interior leaks (drywall and paint).

 

[Thomas Beyer]

Is this a house, converted to a triplex ? What would a similar looking single family house go for in the same condition and neighborhood ?
Who will be the PM if you buy it ? You ? Are you skilled with Ontario eviction and rent collection procedures ? Price seems a little elevated but not overly - given the property condition.