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I want to buy this three flat apartment building that is right down the street in a neighboring town. It’s a well-maintained building and boasts 2-three bedroom units and 1-two bedroom unit. There is no garage but there are 6 parking spaces in the back. Tenants pay their own heat and electricity. The building is in an excellent, excellent neighborhood with award winning schools so I don’t think it would be hard to rent out.
The price for the building is steep at $425,000. There was a similar building that sold in my neighborhood a few months back for $360,000 but it only had 6 bedrooms as opposed to this building having 8 bedrooms.
I could live in one unit and rent out the other two but that would mean giving up my condo which I love. I have enough equity in my place and savings to pay the down payment on the building but it’s a huge gamble that can either pay off well or sink me.
My current salary is $55k but with annual bonuses, I bring in just over $60k. I just graduated from law school a few weeks ago and I am preparing to take the bar exam. I anticipate that my income will increase substantially once I pass the bar and get a law position.
What to do, what to do? This is type of building is exactly what I have been looking for and what I have always wanted. I think over the long haul, it could be an excellent investment.
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6 comments:
As a fellow Chicagoan that has 3 current renters (in my home) and 1 foreclosure under his belt, I'd recommend thinking about the following:
- What are the rental rates for the area?
- What are the vacancy rates?
- On your current (not future) salary, would you be able to handle the mortgage for 3 months and all other expenses?
- Remember rental income will be taxed, so the monthly payments they make won't be what you get to keep.
- Have you had an inspection done? Roof condition? Insulation condition? Windows?
- Have you had friends come and check it out with you? They will not wear "rose-colored glasses" like you might about problems.
My overall feeling would be to wait until you have the big money coming in from a law position. Even when you pass the bar, your going to probably have a year or two working long hours getting paid OK. A foreclosure is not fun, especially when it's your home you are living in..
I am sure that I should wait.
It's unfortunate but once again, the right kind of opportunity comes along at the wrong time. I just have to trust that something else desirable will be available when I am able to take on the challenge.
Thanks for reading!
Chitown: don't listen to sick of debt.
Tie up the property with a contract first, then do your due dilligence. All of your questions can be answered in your due dilligence period, anywhere from 30-60 days.
Look at its value three ways: income, replacement and comps.
Then, make an offer that won't offend knowing that you WILL find something in the inspection reports that "bother" you enough to ask for some credits.
Be sure not to buy in a bad area or in a great area. And, it should be within 40 miles of your own home.
Check the quality of the leases during your due dilligence period.
Hmm..can you afford the mortgage if the sucky renters don't pay rent? That's the main thing.
I know many landlords and sometimes even with careful screening you can get a person who is unable to pay for some really good reason. But you still gotta make the mortgage.
Can you afford the mortgage on your salary solo? If so then maybe yes. But if not then no.
wow....i wish i had enough to put down a down payment
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