Cash flow rental for sale - Please offer your opinions

Please forgive the typo. I'm not sure how to edit it. Thanks.

Hello, I have a 2 bed 1.5bath townhouse for sale and would like your opinion on price, marketing, etc. These are the specs:

It is occupied by a married couple. Both are working and have no problem paying on time! NO RENOVATIONS NEEDED!! The townhouse has already been renovated, painted, and cleaned prior to the tenants moving in.

The profile pic to the left is a picture of the townhouse.
MONTHLY RENT: $769.00
LEASE TERM: 20June2009 - 31July2010
SECURITY DEPOSIT PAID: $749

1240sq/ft
Property taxes: $1,451.54 yearly
Sold for $80,100 on 12/4/2007

Please let me know what other information is needed to price this correctly. Thanks!

Edited: 06/26/2010 at 09:32AM by Ryan Johnson

J Scott

Real Estate Investor · Atlanta, Georgia

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Aug 29 '09, 12:50 AM

Let's use the following parameters for an investor looking to buy your property:

- Uses the 50% rule for expenses
- Looking for $100/month cash flow
- Wants to finance 100% LTV
- Mortgage - 30 yr fixed @ 7.0%

To meet that criteria, the house would need to sell for about $42,700.

In fact, this is exactly what I'd pay for it...

Edited: 06/26/2010 at 09:32AM

J Scott, Lish Properties, LLC
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Website: http://www.123flip.com
http://www.123flip.com

Jon K.

Real Estate Investor · Dallas, Texas

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Aug 29 '09, 01:12 AM

HOA fee?

Edited: 06/26/2010 at 09:32AM

Jon K., VentureNet
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Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Aug 29 '09, 01:25 AM

Corrected the title.

I'm with Jon, what's the HOA fee? Is the HOA well funded? Is the HOA well managed? Are they anti-landlord? Anything restrictions on renting in the by-laws? Personally, I wouldn't buy a property in an HOA, period, so this one wouldn't be for me.

I'd use J Scott's calculation, too. But, with only $385 allocated to expenses and $121 allocated to taxes, I wonder if that's enough. That leaves only $264 and seems like insurance and HOA would eat up a lot of that, leaving little for maintenance, vacancy, and anything else that comes up.

Edited: 06/26/2010 at 09:32AM

Jon Holdman, Flying Phoenix LLC

Ryan Johnson

Real Estate Investor · Sugar Hill, Georgia

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Aug 29 '09, 03:07 AM

Originally posted by Jon Holdman

I'm with Jon, what's the HOA fee? Is the HOA well funded? Is the HOA well managed? Are they anti-landlord? Anything restrictions on renting in the by-laws? Personally, I wouldn't buy a property in an HOA, period, so this one wouldn't be for me.

Thanks for correcting the title Jon! There is no association.

HOA: $0 (there is no HOA)
Taxes: $120.96 month
Insurance: $35 month

If we used a mortgage of $50,000 for example 30yr @ 7% = $332.65.

Total monthly expense: $488.61 (mortgage, tax, insurance)
Total monthly rent (tenants already in home): $769.00

Cash flow: $280.39

Does this look correct to you? If so, what do feel it is worth to an investor?

Edited: 06/26/2010 at 09:32AM

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Aug 29 '09, 04:09 AM

You're missing a lot of expenses. Vacancy, maintenance, tenant damages, common area maintenance, utilities you pay and when it's vacant, etc., etc. Read the sticky threads in the Rental property forum.

If there us no HOA, how are the common areas handled?

That insurance sounds very cheap. Is that landlord insurance?

Is there some other upside here? Local growth, new jobs, etc? Can the rent be raised? I'd stay with JScott's price estimate.

Edited: 06/26/2010 at 09:32AM

Jon Holdman, Flying Phoenix LLC

Ryan Johnson

Real Estate Investor · Sugar Hill, Georgia

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Aug 29 '09, 01:16 PM

Correct, those are expenses that would need to be taken into consideration also.

There are no common areas. Each unit has its own front/back yard and driveway.

Yes, that is landlord insurance through Allstate.

I think with the current market, the rent of $769 for a 2 bedroom in this area is good for now. Wouldnt plan on raising rent at the present time. When the lease ends next year, it may be possible then.

I really appreciate all of the feedback. JScott's price estimate of $42,700 is not bad. I have it isted for $44,900 and just wanted to see if it was in line with what other investors thought. I see I have a little room for negotiations so we will see how it goes. Thanks!

Edited: 06/26/2010 at 09:32AM