Dear experts,

There is one apartment for sale with tenant ready in my hometown. The seller is motivated seller and willing to sell below market plus almost 15%. I am kind of interested as I see it as opportunity to get passive income. Is there any pro and contast of buying apartment with tenant ready? Do I have to make a new agreement with tenant and adjust the rental rate?
Thanks for help!

are you sure the tenant is genuine? because some of these people say "sell with tenant" but once you buy the place, they will move out.

and selling at 15% below market value? why?

Honestly, I am not sure whether tenant will move out or not. I didn't ask details about it. Actually, I am not really worry if the tenant is ready or not because what attracts me is that the selling price is below the market price. Which mean I can get more positive cash flow as my monthly repayment will be low. As told by seller, he wants to sell it coz he wants to find another place to invest. So he needs a urgent money. Is it OK if I buy this house? Any other things should I consider first?
Thanks.

Better survey first before buy the house.

yep. i totally agree with this one.

dont believe everything the seller tells you. do your own homework on the area.

do a price comparison with other houses (rental prices included). drive by the house and the area at night to see if its a well lit area, etc.
also since its an old house, check the interior of the house to make sure there are no cracks, leaks, and whatever else.

Thank you for your sincere advice!

There are many other factors to look at. However, I personally feel u need to answer the questions below comfortably and confidently first.

1. how do u know it's 15% below market value? How did u determine market value?

2. have u determined when the existing tenancy will expire? And can u rent the place out easily?

Both questions are important and go hand-in-hand. One cannot co-exist without the other.

If you're able to answer the questions above - it will give u more clarity with rgds to the viability of this investment.

This post has been edited by Phoeni_142: Mar 30 2009, 07:48 PM

Market value hard to check because you need to know what is the recently transacted price.

I believe TS is talking about advertised price.

er.......there are many ways to define market value. Too lazy to type here. But u can easily read up via Wiki or Google. And why is it hard to check market value? Find it quite easy kua. 2 phonecall - also kau dim.

Advertized prices can be a good proxy to determine whether u have a bargain or not. However, it isn't always reliable. I presume most of us are taking a loan. In that circumstance, it is a MUST to get a verbal indication from a professional valuer on the market value. Professional valuers have dif methods to determine the property value (again, dif story for dif day)

Let's say the avg advertized price = 150K.

U managed to get one at 135K (A so called bargain price)

but the valuation came short at 120K. If that's the case - u are screwed.

So cover all your bases - and benchmark vs. advertized prices, transacted prices, and professional valuation.

This post addresses WHAT to do. HOW to do it - it's a dif issue for another day. packing up from work now.

see u later chief.

its not that easy. A valuer can be wrong. Market price is subjective. And fyi, I only believe in
transacted price.

hmnnn....yes, a valuer could be wrong, in the sense that they tend to be more prudent - especially during these trying times. However, the bank listens to the valuer, chief

and that determines your loan amount.

Sigh - I still don't think u get my point. Who doesn't know that transacted prices are important, chief? But underestimating the quote by the valuer puts u at unnecessary risks.

I have seen many cases where the valuation fell short of "transacted" prices....and the poor borrower had to top up on the loan amount - or even worse - forgoe the whole deal altogether.

And your statement confirms that u don't really leverage much......oh well, you're entitled to your own opinion.

This post has been edited by Phoeni_142: Mar 30 2009, 11:00 PM

I do get what you meant. Just that all the valuer that I know give much higher valuation to property I think should
not be that pricey. That's why I think valuer give higher sense of market value that give us wrong idea about the
real market value. But valuer is a good place to start nonetheless.

Again.....I think u have to understand the dynamics of leverage & how the valuation is done.

Maybe my experienced is skewed.....normally the valuers I know tend to give a more prudent estimate vs. market value.....more so now, during these trying times.

Er - if a valuer assigns a higher value vs. the transacted market prices - this is a reason to celebrate, chief!

You have the option to get a bigger loan amount! Personally, I dislike taking out my own money when I invest in prop's.

Me too. one question. Do you buy MRTA when u invest property???