Newbie is this a good deal?

Question

Hey guys this is my first post!

I'm looking at a property in Delray Beach FL (I'll post below trying to run numbers for my first time). I don't know nearly enough of what I am doing just looking for feedback. I'm wondering if this property will cash flow strong. I also want instant equity so wondering what a good price would be. This is what I know. Three units. Rents for 700, 700, and 1000. Priced at $265,000. Expenses would be $333 month property taxes, $1300 mortgage + insurance, no hoa. Assuming maybe $350 for maintenance a month. So that would cashflow $417 a month hypothetically. What do you think? Any thoughts and constructive criticism is much appreciated!

http://www.realtor.com/realestateandhomes-detail/1...

Roger H. · Answer

Hi Brock,

Need a bit more information but based on $2400 mo rent roll it could be a good buy. Lots of things to consider review before purchasing. Has your broker or owner provided list of expenses / operational costs and have you verified them for accuracy.

Additionally you haven't calculated taxes properly. Do a search for Palm Beach Tax authority and look up the address for current taxes. Then use the tax calculator to get a guesstimate on what your taxes will be for 2016 tax year. I see it as ~$420mo in RE taxes for 2016 based on a $250k purchase price.  Also figure a 10% increase in the appraised value year over year as the taxing authorities will likely bring your appraised value to the allowable maximum for several years.

As far as mortgage, Since you appear to be 1st timer and the banks will likely be looking at your personal income to pay the mortgage more than the rents you feel you would collecting and using towards your mortgage payment. So talk to a couple bankers / mortgage brokers and see what they would want to see in order to qualify this property for a loan.

Also what type of fix-up / rehab do the units need? Not having any pics of the interiors always make me leary as they're usually hiding something by not posting pics. Other things I like to look at is age of all mechanicals, roof, etc as there may be a need to replace, repair these items sooner than later.

You also need to calculate insurance for fire, vandalism, liability, hurricane etc which will be a higher than a single family residence. Call your broker for an estimated quote.

Finally you should also take some of the free webinars, download some of the analysis spread sheets from file place and use the calculators here on BiggerPockets. These Webinars / tools have helped me learn a lot.  I believe you can use the calculators up to 5 times for free and is unlimited once you become a paid member.

Best of luck on your endeavors...

Roger H. · Answer

You may want to ask around and see if someone is interested in the deal. While I wouldn't be interested in buying that particular property you may find an investor here on BiggerPockets or area real estate investment groups that would pay you a percentage for putting the deal together for them.

Remember there's lots of ways to make money in real estate. Buy and hold is only one of many.

Keep on trying.

Brock Laramee · Answer

Thanks Roger some really good advice. I wrote down some things to consider for myself from your post.

You have helped me realize that I probably won't be a "good candidate" (haha) for banks right now as I am earning $0 as a full time college student. If I decide to go into real estate investing immediately after college, rather then getting a job with a salary, I'll probably be forced to invest creatively in the beginning. Which is just fine. I assume the banks will appreciate a track record once I get on my feet. Then I'll hopefully be able to go the traditional route.

Nice to see someone from the area!

Cheers,

Brock