Profile picture for brewster71

First-time buyer, multi-family in Providence

Soooo...

Hi all:

I'm a first-time buyer looking for a multi-family in the Providence area in the $100,000 range. I'm not overly familiar with the Providence neighborhoods, though I did live in East Providence briefly, near Brown. I'm doing my research, looking at properties, and reading up on fixer-upper properties, and how to go about buying them. A lot of the houses are producing rent already and the mortgages are to LESS than the incoming rent . Why haven't they been snapped up already if they're such moneymakers?

The book I'm currently reading, called "Investing in Fixer-Uppers : A Complete Guide to Buying Low, Fixing Smart, Adding Value, and Selling (or Renting) High ", strongly recommends seller-financing as the way to go, with as little money down as possible

Things I'd love some input on:

* pros and cons of seller financing
* how realistic is it to be able to negotiate a great deal for homes that are bank-owned or short sells. 
* how to find a "buyer's realtor" in the providence area
* what will I need cash for, other than a down payment (does every inspection I get done on a possible purchase come out of my pocket? That type of thing)

Any information, no matter how random, would be appreciated. I'm totally new to all of this!

Thanks!
  • March 06 2011 - Providence
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Answers (6)

Profile picture for wreynol4
Some great answers here, not to much more I could add. 
  • November 27 2012
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To answer some of your concerns;

The reason why many may not have been snatched up, even though on paper they make 100% financial sense, is they don't qualify for financing.  they can be in such disrepair that conventional financing won't touch them and they'll need hard money or cash investors.  There is a point where an investor would consider the work, effort, headache and hassle for the right return.  Unfortunately, some homes are so terrible or the potential tenants won't justify the investment.

-Seller financing is a great option, but with LOADS of risks on the buyer's part with less o the seller's part.  It depends on the type of seller financing you pursue, which you should go over with your attorney 1st and foremost.  But the major risk with seller financing is that you agree to purchase it at a set price, and pay the seller monthly (just like a loan with a bank) but with a balloon payment after a certain period.  If after that period the value hasn't increased, you, the buyer, has to come up with the difference out of pocket or the seller can come in and take the property.  It's best to have a personal relationship with the seller and to know you can 100% trust them before you take on seller financing.  There are too many pitfalls that can hurt you as a 1st time home buyer.

-Distressed sales (REOs & Short Sales) are the best deals out there.  But the buyer takes on a risk, mainly the lack of a disclosure, repairs, and typically loads of title issues (in REOs at least).  In a short sale the closing date is very vague and never set in stone due to the time it takes a bank to respond. Also, financing, specifically low down payment financing, can become troublesome due to the seller's inability to repair needed items (lead paint, safety hazards, fire systems etc)

-Finding an Agent is easy!  Either look to see who has listings in the area, speak with friend and family for a referral, or go to open houses and find an agent you know that will work hard for you.  They're out there.

-In excess to your down payment you'll need funds for closing costs, inspections, appraisals and potentially repairs needed.  Yes, you do have to pay for all inspections. It is the buyer's responsibility to research the property and title to see that he's buying a good property with a good and marketable deed.  Your closing attorney handles the deed and title insurance.  Depending on your financing, property your purchasing and current tenant situation, your closing costs can vary from $4,000-$12,000.  Today, with PMI in addition to home owners insurance, a minimal down payment purchase can rack up the closing costs REAL fast. 

I hope this helps anyone out there that is reading this.  Any questions I'd love to help.  Just give me a call!
  • November 27 2012
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Good Morning!
You have gotten a couple really great answers here, but as previously mentioned, it is almost guaranteed you will come up with many more questions!  My opinion is that it is IMPERATIVE that you have an agent that is NOT ONLY familiar with the areas you are looking in but ALSO familiar with multi-families, and R.O.R. and R.O.I.  So I woudl suggest do your homework and find yourself a really good agent to represent you, I think that is your first step!  A good agent will be patient and walk you through the whole process.  Good turn into a beneficial relationship fpr both of you!
Good Luck!

Erin Diaz, Broker ~ Owner
Beaches & Backroads Realty
  • March 12 2011
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Profile picture for Bob Sparn
As an investor myself who has bought and sold 8 houses last year.  I would recomend that you "start with the end in mind".  Are you going to be living in the property or are you going to be holding it for investment?   Bare in mind the better the location, the better the resale and or the rent, however you may end up paying more for the property.  That is ok if you know what you are looking at.  I see many new investors that think they can fix a property up for a lot less than is realistic and they some times buy properties that look like a "deal" because the property is "cheap" and then they can't sell them or rent them due to the "cheap area" it is located in or they have spent too much to fix it.  Right now I am seeing multi-family properties going fairly quickly if they are good, priced right and in decent area's.  The ones that are not selling have either a poorer location or need more work than is realistic.  When I buy a property I look at the "cash on cash" method of investing which shows me what it will cost and what I am getting for a return, before any appreciation is fiquered in.  Let me know if you would like a review of any property you are looking at and I can show you what it would like.  In the past seller financing was the way to go, however many of the best deals now, the seller has no equity and the banks are more concerned that if they sell you a property you will be able to close on it, so creative/owner financing is not what they want to hear. Many other ways to leverage your self in this market besides owner financing.  Good luck, it is a great time to be out there investing.
  • March 07 2011
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Those are all great questions and I guarantee along the way you will come up with dozens more. One of your top focuses right now should be finding an agent that is knowledgeable about the area you are looking. 

Sites like zillow are great for some general info but you can run into many opinions on hear and that can drive you crazy. I have some great info on my website www.RIHomeCollection.com. Also, on the about me page you can find a link to my blog which may help answer some questions also. 

Good luck and let me know if I can be of any help.
  • March 07 2011
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Profile picture for cjcsellshomes
Hi Brewster,

Let me do my best and try to help you out.

First off, I would highly recommend that if you are not familiar with the neighborhoods in Providence it would be in your best interest to drive by some of them as it can really change from street to street and as a result the home values will vary drastically.

Then the next most important step is to find yourself a buyer agent.  Luckily you have found one with this reply :)

Yes, every inspection you decide to have you pay out of pocket before closing on the home.

The main reason you are seeing a lot of homes that look like great deals on paper is that the lending on non owner occupied is very challenging right now.

I would love to chat more at your convenience, but I hope I have answered some of your initial questions.

Happy Hunting,
Chris
  • March 06 2011
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