BiggerPockets

How about locating a credit partner and seeing if they will let you participate in the investment for finding it?

Or you could tie it up and sell the contract if it is a good deal.

Can you post the numbers for the deal? If you can we may be able to help more.

well the problem is i know the people and the agent selling it and that wouldn't fly..i would rather buy it because i could add it to my grandmothers property which will someday be mine anyway...it was $129,900 after about 5 months they dropped it ten grand and I'm not quite sure but i think someone made them an offer last week not sure if they excepted or not. but I've ran the numbers like insurance and property tax and with the rent alone the house would pay for its self within 11-14 years give or take because of the unexpected. http://xbstair.wesellcolumbusrealestate.com/listing /mlsid/39/propertyid/210016548/syndicated/1/

Uh oh, if you think taxes and insurance are the only expenses, you lose. Well not really, but you will. Read in the rental property forum about the reality of rental properties.

What will this bring in rent? You need something like $1600-$1800 for this to be profitable.

Vacancy, maintenance, capital expenses, legal fees, evictions, tenant damage in excess of security deposits, utilities (at least when its vacant, property management (even if you do it yourself, your time is worth something.) Etc.

Read about the "50% rule", which says that over time, expenses (in the IRS sense of the word), capital (roof, furnace, etc.), and vacancies will add up to 50% of rent.

So, here's your deal:

Rent: $900
"Expenses": $450
NOI (net operating income): $450
Payment: $660 ($110K, 6%, 30 years)
Monthly loss: $200

With 25% down:
Down: $27,500
Loan: $82,500
Payment: $495 (same terms)
Monthly loss: $45

So, you've invested $27,500 to lose $45 a month. Terrible deal.

Jon---that 50% rule I have never found to be applicable. It is not a bad benchmark for worst case scenario. Out of the 9 properties I own, I do not have 1 property over the 4 years that I have owned them that has cost be 50% of my income. Here is a pretty standard deal we offer our investors.

Purchase Price (turnkey) $55,000
Rent: $925
Deposit: $500
Taxes: $115
Insurance: $30
Property Mgmt: $75
Vacant Rate (8%): $74
Repairs (10%): $92
Total Cost: 41%

To date, 41% would be high. I have found if purchasing a house with renovations, doing them at a high level of standard on the front end avoids most maintenance. I rarely have to pay for leaky faucets, running toilets, etc. It helps that I do not include appliances and that we make the tenant pay for anything under $100. Putting some of the liability on the tenant usually makes them take a little more care of the property.

Not trying to bust your chops and say that the 50% rule is incorrect, more or less indicating that each market is different. To use the 50% as a worst case scenario is not a bad idea in budgeting your properties, but each property should be examined to the cost of each respective market. I would not one a new investor to get discouraged by being scared off by this 50% rule.

Lastly, if you can do your own repairs, the $ saved on repairs is huge!

Im gonna have a job here soon so if anything happens ill have the money to fix it that im not worried about...back to me getting the money for the house which is what this post is all about in the first place...any takers?

The OP said that it would be made a part of his grandmothers' home which would be his as well. 10 or 12 years of break even rents and absolutely no cash in hand does not mean it's a bad deal since there are intrinsic reasons for buying properties. Every investor does not always buy real estate for cash flow and they ain't broke, at least I'm not yet! LOL

The most profitable deal I did, (not biggest dollar amount, but by %) were some properties I bought to sell others off and keep one. I kept it about seven years and it was never rented, then did a 1031.

We can certainly point out the lack of cash flow as a buy and hold, but we really can't say it's not a profitable transaction in the big picture.

Jon is correct in his assessments, his method is valid, but IMO not the only way to assess the potential of a property. In fact, in most of my purchases, appreciation was more of a concern to me than cash flow, I just don't want them eating hay while they are in the barn!

Josh, what is your long-term goal? Do you expect to "live" off the cash-flow or do you simply want to hold onto the property for several years and cash in on the equity/appreciation? Your approach will help determine whether or not something is a good idea.

Would you rent your house out to a potential tenant who is getting their old job back next week?

But she does rent to people who are retired/disability because the rent still gets paid.