Does this sound like a good deal?

Question

-3 bedroom 2 story place. Plus full basement
            -About total 1800sq ft
            -Within 5 years new:
              -water heater
              -roof
              -electrical
              -windows
              -bathroom
              -kitchen less appliances
              -carpet
              *Rehabbed and rent ready as sitting
            
            Asking 45k
            brought 800/month for rent in past
            
            The way Im looking at it is that it is cash flowing about 100/month after everything. Sound like a good deal? I was really wanting to get into more rehabbing, but I know I can afford this place real quick probably little or no money down. Do you think its better to have a property than wait for a nice rehab project?
            
            My original plan was to live in Peoria and start my business slowly in Chicago. I ultimately want to live in Chicago in about a year or two. Should I buy a few places in Peoria while Im here to get started and learn the business or save and wait? Im just scared to own property where Im not ultimately going to be living. Or should I be fine with owning them and using a good property management when I move?

Regan Brookins-Longville · Answer

Hello Tyler,

Man, that's a sweet deal.  I'm in Southern California where a house, for that price, practically has to be in the boonies.  Only $800 for rent?  Seems like you could get more, but I don't know the market, so much, out where you are.  But, even in the boonies, out here, a house of that size would get at least $1,000, probably more.

Just do it.  If you think about it, too much, someone else will snatch it up.  Take the chance.  Buy it, and good luck!

Tyler Carpenter · Answer

Thanks Jon thats pretty cool. Ill add it to my collection. I have a really neat gadget on my phone called buy this duplex and it does what that does when Im on the go and looking at a property. But this is nice to have a home.

Anyone out here that has an iPhone, download Buy This Duplex Lite. Is an awesome tool for you. Just thought I would put that out there

Tyler Carpenter · Answer

I made a spreadsheet in college on excel that has everthing you may need. I can send you a link or post it up on somewhere if it does help outpeople. It in no way is perfect but if you can figure out what I was trying to do it can be used for at last a quick monthly payment calculator

Jon Holdman · Answer

Try this:
            
            http://spreadsheets.google.com/ccc?key=pfsaXr8yUN2SbBUeByGKzRg
            
            You'll need a google account in order to make a copy and modify it.

The numbers three are for a specific deal in another thread.  I used 45% for expense because the figure the poster gave for the rent was after vacancies.

Michael Rossi · Answer

Larry,

While you certainly could make a spreadsheet to do that, why would you?  You can do this in your head.  Here it is in one step.

Subtract $100 from half the gross rent.

It's that easy!  That gives you the maximum payment you can make.  Put that payment in your mortgage calculator to get the max purchase price and then subtract rehab costs, closing costs etc.

EASY!

Mike

Larry Seith · Answer

Hey Mike,
After reading this post and the other one on "cash flow" I was wondering if you could make a simple spread sheet to show the folks here a "ballpark" good deal. For example the rent is one of the factors in the equation that can be substantiated so you start with that. Rent = $800
We use the 50% rule to get $400 NOI
Then use the average 30yr 7% loan to show how much monthly payment the NOI would support. You may even want to take out the $100 cashflow to guarantee income. This would leave you with how much you could pay for a particular property.
I see it as a list of rents followed by a list of prices that you should pay for a property that would still guarantee at least $100 cash flow.

What do you think? Does anybody out there know Excel software and can they make something like this?

Tyler Carpenter · Answer

Im no planning on rehabbing and flipping Mike. I plan to buy foreclosed properties rehab them, get them rented and in a year or so depending on the seasoning, get a new appraisal and refi at 75% cash out. I know its easier said than done, but anything I put my mind to I know I can achieve.

Regardless of everything else, Does this sound like a good deal though? So at least Im learning to look for the right property. Heck I might even move in there and rent it out a few rooms to friends. I know then it would cash flow real well and I get free rent.

Jon Holdman · Answer

If that's an ad they're running, its almost certainly targeted to owner occupants.  Banks won't be nearly as friendly to investors.  Even for OOs, there are probably so many conditions as to make it difficult to actually get that loan.

Michael Rossi · Answer

Yes, it looks like a good deal - by the numbers.

Here's how I see it.

Gross rents:  $800
Operating Expenses:  $400
NOI:  $400

Mortgage ($45K, 30 yr, 7% NOO): $300

Cash flow:  $100 per month  Good!

Mike

Michael Rossi · Answer

If you're wanting to get into the rehab business, then I certainly wouldn't buy a rental. That's a completely different business.

If you're going to be moving in the near future, then I would save your money and wait until you arrive at your new location.  Owning rentals long distance just adds one more level of difficulty.  I'd just keep learning and wait until you're in your permanent location.

Mike