rooming house

[therealpotentials]

Hi. I would like anybody`s opinion on a rooming house.

I have seen this one rooming house that I am considering for investment. It has an annual rent of $61,200 for the asking price of $369,900.

Is this something I should pursue?

Thanks a lot.

 

[PeterKinchMortgageTeam]

QUOTE (therealpotentials @ Apr 14 2008, 01:53 PM) Hi. I would like anybody`s opinion on a rooming house.

I have seen this one rooming house that I am considering for investment. It has an annual rent of $61,200 for the asking price of $369,900.

Is this something I should pursue?

Thanks a lot.

It`s tough to get a conventional mortgage on a rooming house (ie from an A lender) . You`d likely be taking a loan from an alternative lender so your rate would be higher and you may be looking at a fee. Take those costs into account when calculating your cashflow.

 

[margaretcowan]

Hi

As a former rooming house owner, I`d do a lot of looking behind these "attractive" numbers to find out the reasons the numbers look good...on the surface.

Where`s the property? In a drug infested area or a quiet residential street of family oriented apartments or houses?

Who are the tenants? Clean, sober, lower income or on government cheques people or demanding tenants with a series of disasters in their lives?

Why is the owner selling? Is the property driving her nuts? Are expenses too high? What is the net operating income? What does she get after her mortgage payments?

What is the condition of the property? How much do you need to spend to do to make it a clean, well maintained, decent lookng place that will attract a good quality of lower income tenant?

If you do decide to buy, do not manage the property yourself. More stuff always happens in a rooming house, so factor in property management fees.

Hope this helps,
Margaret

 

[GarthChapman]

Great advice from Margeret. Add to all the above - does the current use of the property comply with the municipal zoning for that property?

 

[reinvestors88]

Hello there,



Though old I believe this post is still relevant.



Question please:

1 - If the property is zoned as Rooming House and assuming the roomers intend to stay longer, can you legally put yearly leases?

2 - Supposing there are no leases in place, what sort of 'lease' document would you require the roomers to sign? Would a month to month lease sufficient?

3 - Supposing you are buying this type of property and the listing agent said there are no leases in place but can only provide tenants' acknowledgements and pro-forma financials. Is this a 'Red-flag'?



Thanks for sharing your thoughts/experiences.