First deal - thoughts?

11 Replies

So I am currently seeking my first deal. I'm interested in a 2br/1ba listing and wanted to hear some feedback on it.

I know 2/1 investments are looked down upon somewhat, but they are on the cheaper side so I can stay more liquid. They also give me the opportunity to get a property that is in good condition that doesn't need a lot of repairs before renting it out. After doing some research it seems that 2/1 rentals attract singles or older couples which are less likely to damage the property. That's my justification at least....

Details: 2br/1ba 900 square foot rancher. Has a small eat in kitchen and a unfinished basement with washer and dryer hookups. Property is in very good condition (from pictures). Central air and oil heating.

How will oil heating affect the rental? Also, does the washer/dryer in basement impact the rental? I'm guessing some might not want to lug laundry up and down the stairs.

Financials:

- 85k list price
- Median rent $1000
- taxes $3700/yr

Assuming 20% down and 5% interest rate the monthly payments would be $365. So according to 50% rule, it would be a +$135/month cash flow property.

I would guess that oil heat is not that uncommon up there.  My thought is to just make sure about who is paying for the oil, you or the tenant.  I only think the washer/dryer in the basement might turn off a few elderly potential renters as they may not be spry enough to handle the stairs but once again I'm sure basement laundry is not uncommon up there.

The numbers look right to me, but it seems a bit thin on cash flow.  If you could get more like $1100/mo on the rent that would get the cash flow up in the $225-250 range which seems more worthwhile to me.  Just my 2 cents.

There is nothing wrong with 2/1's in my opinion. I own a few of them and will continue to buy more. They aren't as "universal" as a 3/2, but there is definitely a demand for them. You can always make a phantom post on craigslist prior to purchase to see if there is demand for the unit if you're concerned.

In all my rentals that have basements, the washer/dryer is down there. It's fairly common where I invest and I wouldn't be too concerned about it. 

great, thanks for the advice

Kyle, 

Have you had a chance to compare to properties in Pittsburgh?

those seem like pretty tight numbers and I am not loving the 2 bedroom idea. 

In my market, Cleveland, I can get into a nice place for less than 25k that throws 800 per month. That is not in a war zone either. 

I like to look at houses like that to finance like a car note. Use IRA money at 12% and a 5 year amortization. This way you own it free and clear in a hurry!

Just my 2 cents. 

:-)

Medium screen shot 2017 05 20 at 8.00.17 pmRob Gillespie, Rob The House Guy, LLC | [email protected] | 440‑426‑9134

Originally posted by @Rob Gillespie:

Kyle, 

Have you had a chance to compare to properties in Pittsburgh?

those seem like pretty tight numbers and I am not loving the 2 bedroom idea. 

In my market, Cleveland, I can get into a nice place for less than 25k that throws 800 per month. That is not in a war zone either. 

I like to look at houses like that to finance like a car note. Use IRA money at 12% and a 5 year amortization. This way you own it free and clear in a hurry!

Just my 2 cents. 

:-)

 I'm actually looking to invest in suburbs of philadelphia.  Thats a killer deal but not found in my market.  The stuff you mentioned is over my head but my initial thoughts are that would be putting way to much money into a property.  Especially because I am starting to invest and I don't have a net worth of a few hundred thousand.

Anyone have any thoughts on properties with bedrooms all of the same size (such as 12x10).  In your experiences does this take away the properties ability to rent?

Now that you have screened this property with the 50% rule and have found that you are interested, you need to run the actual numbers to see what the real cash flow is.

$1000 - mortgage - prop tax - insurance - maintenance (10% = 100) - vacancy (8-10%) - property management (if you use it) = cash flow.

Also, is the place truly rent ready or does it need some rehab?  Water heater new? Roof?

Originally posted by @Brant Richardson:

Now that you have screened this property with the 50% rule and have found that you are interested, you need to run the actual numbers to see what the real cash flow is.

$1000 - mortgage - prop tax - insurance - maintenance (10% = 100) - vacancy (8-10%) - property management (if you use it) = cash flow.

Also, is the place truly rent ready or does it need some rehab?  Water heater new? Roof?

 how do you calculate a vacancy expense and why is it considered an expense?

Originally posted by @Brant Richardson:

Now that you have screened this property with the 50% rule and have found that you are interested, you need to run the actual numbers to see what the real cash flow is.

$1000 - mortgage - prop tax - insurance - maintenance (10% = 100) - vacancy (8-10%) - property management (if you use it) = cash flow.

Also, is the place truly rent ready or does it need some rehab?  Water heater new? Roof?

This property actually went off market but I am looking at another property. This one is actually a condo but I have not seen it yet. Numbers are $113,000 list, median rent $1250, HOA $130, taxes $3900 but got appealed by $900.

Factoring in the numbers you gave its:

rent - mortgage - insurance - maintenance - vacancy - HOA

1250 - 470 - 50 - 125 - 125 - 130 = +350

This number seems to high to be right

Originally posted by @Kyle M.:
Originally posted by @Brant Richardson:

Now that you have screened this property with the 50% rule and have found that you are interested, you need to run the actual numbers to see what the real cash flow is.

$1000 - mortgage - prop tax - insurance - maintenance (10% = 100) - vacancy (8-10%) - property management (if you use it) = cash flow.

Also, is the place truly rent ready or does it need some rehab?  Water heater new? Roof?

This property actually went off market but I am looking at another property. This one is actually a condo but I have not seen it yet. Numbers are $113,000 list, median rent $1250, HOA $130, taxes $3900 but got appealed by $900.

Factoring in the numbers you gave its:

rent - mortgage - insurance - maintenance - vacancy - HOA

1250 - 470 - 50 - 125 - 125 - 130 = +350

This number seems to high to be right

 whoops - taxes = 350 - 325 = +25

last number was factoring in numbers now it would be 350-252 = +98 when taxes that were appealed takes affect

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