Actuarial Outpost
 
Go Back   Actuarial Outpost > Cyberchat > Non-Actuarial Topics
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions


Upload your resume securely at https://www.dwsimpson.com
to be contacted when our jobs meet your skills and objectives.


Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 04-01-2020, 11:31 PM
somewhere somewhere is offline
Member
CAS
 
Join Date: May 2018
Posts: 205
Default Investing a wooden 3-unit multi-family apartment building built in 1875

The asking price is $500k. Apparently recent interior remodeling have been done. Owner lives in one unit, the other 2 units fetch $2000 a piece. The Owner unit is also projected to rent for $2000 / month.

That's a $72,000 annual revenue.


The neighborhood is a very nice low crime, livable neighborhood.

my concern is the fact that it is a wooden building that is already 100+ years old. How many more years does it have left?

EDIT:

Property was last sold in April 2015 for $250K.
It is also a block from a very nice green park.

Last edited by somewhere; 04-02-2020 at 12:28 AM..
Reply With Quote
  #2  
Old 04-01-2020, 11:38 PM
ElDucky's Avatar
ElDucky ElDucky is offline
Free Mason
 
Join Date: Jul 2004
Location: In a van, down by the river
Studying for Let me worry about blank
Favorite beer: Trappistes Rochefort 8
Posts: 44,935
Default

Several hundred? The frame isn't typically the issue with old buildings.
__________________
I live near the cows.
Reply With Quote
  #3  
Old 04-01-2020, 11:38 PM
ElDucky's Avatar
ElDucky ElDucky is offline
Free Mason
 
Join Date: Jul 2004
Location: In a van, down by the river
Studying for Let me worry about blank
Favorite beer: Trappistes Rochefort 8
Posts: 44,935
Default

Also, holy crap, where is this? That's a great return.
__________________
I live near the cows.
Reply With Quote
  #4  
Old 04-01-2020, 11:42 PM
Academic Actuary Academic Actuary is online now
Member
 
Join Date: Sep 2009
Posts: 9,581
Default

What are the taxes and insurance? Who is responsible for utilities? When was the last time roof was replaced? How about the wiring? Do you know anyone who is good a fixing things as things often go wrong in old buildings. Are the other two units currently rented?
Reply With Quote
  #5  
Old 04-01-2020, 11:45 PM
somewhere somewhere is offline
Member
CAS
 
Join Date: May 2018
Posts: 205
Default

Quote:
Originally Posted by ElDucky View Post
Several hundred? The frame isn't typically the issue with old buildings.
My google told me that wood frame buildings only last between 100-150 years?

Quote:
Originally Posted by ElDucky View Post
Also, holy crap, where is this? That's a great return.
I am also surprised by the return as well.

Given the fact that it's a corner unit that has no space between the building and the sidewalk there is a strong sense of lack of privacy. I wouldn't want to live in a situation like that. But of course, that's just me.
Reply With Quote
  #6  
Old 04-01-2020, 11:48 PM
somewhere somewhere is offline
Member
CAS
 
Join Date: May 2018
Posts: 205
Default

Quote:
Originally Posted by Academic Actuary View Post
What are the taxes and insurance? Who is responsible for utilities? When was the last time roof was replaced? How about the wiring? Do you know anyone who is good a fixing things as things often go wrong in old buildings. Are the other two units currently rented?
Yes, the other 2 units are rented, reportedly at $2000 a piece. The roof is also very recent. Insurance is 200. Taxes is 500.

Also, I forgot to mention that this property was last sold in April 2015 for $250k.

So the price is doubled in 5 years? Must be some great interior remodeling?
Reply With Quote
  #7  
Old 04-01-2020, 11:54 PM
Academic Actuary Academic Actuary is online now
Member
 
Join Date: Sep 2009
Posts: 9,581
Default

How would you be financing? Do you have your own property to take a home equity loan?
Reply With Quote
  #8  
Old 04-01-2020, 11:58 PM
somewhere somewhere is offline
Member
CAS
 
Join Date: May 2018
Posts: 205
Default

Quote:
Originally Posted by Academic Actuary View Post
How would you be financing? Do you have your own property to take a home equity loan?
I currently don't own any property. It would be my first property. I am hoping to tell the bank that I plan to live in one of the units so that I can put down 5%. Assuming 5% closing fees I would be investing $50k. After I should be living rent free if I do choose to live in one of the units. If not, I'll be getting positive cash flow.

But it all sounds too good to be true. I am not sure if the $2000 rent is sustainable or not. Maybe the current renters are just odd to pay so much.
Reply With Quote
  #9  
Old 04-02-2020, 12:06 AM
Academic Actuary Academic Actuary is online now
Member
 
Join Date: Sep 2009
Posts: 9,581
Default

Quote:
Originally Posted by somewhere View Post
I currently don't own any property. It would be my first property. I am hoping to tell the bank that I plan to live in one of the units so that I can put down 5%. Assuming 5% closing fees I would be investing $50k. After I should be living rent free if I do choose to live in one of the units. If not, I'll be getting positive cash flow.

But it all sounds too good to be true. I am not sure if the $2000 rent is sustainable or not. Maybe the current renters are just odd to pay so much.
I don't think the bank is going to buy that. Rental properties carry a requirement of 15% down payment and carry a higher interest rate. My advice would be not to buy unless you plan to live in the property for at least a couple of years. The fact that all the units are rented creates a problem.
Reply With Quote
  #10  
Old 04-02-2020, 12:08 AM
somewhere somewhere is offline
Member
CAS
 
Join Date: May 2018
Posts: 205
Default

Quote:
Originally Posted by Academic Actuary View Post
I don't think the bank is going to buy that. Rental properties carry a requirement of 15% down payment and carry a higher interest rate. My advice would be not to buy unless you plan to live in the property for at least a couple of years. The fact that all the units are rented creates a problem.
No, only 2 of the 3 units are rented. The other is currently owner occupied.

But it is a 4-unit or less building, which means the bank will treat it as residential if the owner plans to live in one of the units. This means 5% down is doable. I think.
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 10:57 PM.


Powered by vBulletin®
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.42339 seconds with 9 queries