Board Topic: Knowing the right answers
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Knowing the right answers

Posted by: Ginni Nov 4 2003, 03:56 PM
dry.gif We are looking at a 3 bedoom, living, kitchen, 1 bath, with an attached 1 car garage Duplex. It's a slab foundation with the water heater on the second floor along with laundry hook up. Asking 125,000. Last taxes were 108,000. Both sides are rented and the income of the rent is appr. $1050. My question, is this a good sounding buy...and we would be banking on bith sides being rented to make the loan payment? Is that a smart move, or should we have enough in savings on our own to make the payment IF they were both to become vacant? Most people say don't worry, it's an investment for your life? What do you think?

Posted by: loanuniverse Nov 4 2003, 07:21 PM
Let me address this from several angles.

First, you are giving me an asking price and an assessed price neither of which is the price that you should be willing to pay for a property. The seller is going to give you the price that he thinks the property is worth or how much he hopes to sell it for, while the county will show you the amount for which the property is valued for the purpose of valuation. The price that you want to pay is either the appraised value {what the market is demanding for the property} or a lower amount, which means you got a bargain. Although, I have to say that the number quoted sounds reasonable as properties are usually sold at a small premium over the assessed value.

The good thing about this is that getting comparables should be relatively easy with resources such as the realtor.com website. Checking to see the asking price of similar properties in the same neighborhood will give you a better idea. In addition, I would add a clause to the contract that the property must be appraised at $125,000 in order for the closing to occur.

Regarding whether this is a good deal or not, frankly there is not enough information. I would need to know about the expenses associated with the property, including but not limited to taxes, insurance, utilities, repairs & maintenance. In addition, you need to factor in the kind and terms of the financing available.

It essentially comes down to the following:

Can your rental income adjusted downward by a certain percentage of projected vacancies {you will not have tenants all the time} pay for all your operating expenses and then be enough to pay for your debt service? If it can pay for it and give you a return on the money that you will be investing {the down payment}, that makes you happy then the project is a GO

Hope this helps.
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