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Multi-Family Bargains in Montclair
January 13, 2009 by admin · Leave a Comment
A client of ours recently came to us with a goal in mind. This 27 year old woman wanted to purchase a 2 family house in Essex or Passaic County where she can offset some of her monthly expenses with rental income. She is a school teacher on a fixed income of approximately $45,000 per year, has lived with her parents since getting her masters degree and virtually living for free. In the meantime she has saved over $80,000 which is liquid in the bank. I will save the argument of conventional vs. FHA financing which you can read HERE, and will focus on what she chose to do.
She chose to use conventional financing with 20% down. She agreed to pay $300,000 for the home which was negotiated by us from $329,900, a short sale from the bank. A little about the home: The home has a total of 4 levels; basement, first floor, second floor, and attic. The attic and basement are completely finished off and are certainly liveable. The first floor unit, including the basement are unoccupied where the second floor is occupied who is also using the attic. The second floor / attic are rented at $1,350 per month by tenants who have been living there since 1997. The home is 5.5 over 5.5 meaning there are 5.5 rooms per unit, each having 2 bedrooms and 1.5 bathrooms, a living room, and a separate dining room.
As mentioned, she is putting 20% down buying her principal amount down to $240,000. Her monthly mortgage including all taxes and insurance escrows total about $1,900 per monht. After collecting the $1,350 from the tenant, our client is left with a payment of $550.
This has turned out to be a phenomenal deal for our buyer. Since the original purchase price of the home for the previous owner was $430,000, this is nearly a 35% discount. With mortgage rates constantly declining and sales picking up, we think she made a wise investment in a home she absolutely loves and plans to live for a while. Most importantly, if she ever decides to become a real estate investor, she is gaining valuable experience with managing her own home and tenants.
On a fixed income of $45,000 and paying $550 for her monthly housing expense, she is in a very advantageous position.
Side Note: She has put $5,000 in a CD account which she contributes an additional $250 per month out of her monthly paycheck to serve as a reserve account. Her goal is to have a $10,000 reserve account by the middle of 2010. Reserves could go toward fixing anything in the home from aging or even a tenant vacancy. The picture in this post is the actual home that she is purchasing.
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