Help me see if this is a deal

[Thomas Richardson]

Can someone please help me evaluate this deal? its meeting the 1% rule easily and it seems like it should be a good deal but the way I am running the numbers it doesn't seem to make sense but not sure if I am running it right. I would like to be able to rent it out after, it is a bank owned property that will not qualify for financing but I have access to an equity line of credit at 6.5% Heres the deal

Sale price 40K

Taxes $2500/year

Insurance $1000/year

I like to set aside conservative numbers of 10% management fees, 10% vacancy, 10% cap ex

I am estimating about 2000 in closing costs and a 15000 reno budget.

It should rent for a minimum of $1000/month

Should I be analyzing this as a cash deal and the interest on the loan an additional operating expense or as a 100% financed deal? I would like to have it paid off in 10 years and maybe that is too aggressive for this deal?

Let me know if I am not factoring anything in or forgetting another option

Thank you!

[James Wise]

Originally posted by @Thomas Richardson:

Can someone please help me evaluate this deal? its meeting the 1% rule easily and it seems like it should be a good deal but the way I am running the numbers it doesn't seem to make sense but not sure if I am running it right. I would like to be able to rent it out after, it is a bank owned property that will not qualify for financing but I have access to an equity line of credit at 6.5% Heres the deal

Sale price 40K

Taxes $2500/year

Insurance $1000/year

I like to set aside conservative numbers of 10% management fees, 10% vacancy, 10% cap ex

I am estimating about 2000 in closing costs and a 15000 reno budget.

It should rent for a minimum of $1000/month

Should I be analyzing this as a cash deal and the interest on the loan an additional operating expense or as a 100% financed deal? I would like to have it paid off in 10 years and maybe that is too aggressive for this deal?

Let me know if I am not factoring anything in or forgetting another option

Thank you!

 You can't look at it with tunnel vision. Even though you are buying it as a rental investment you need to look at the comps. Your resale value is incredibly important. If the comps for similar houses are 3x this amount vs half this amount that really sways things.

What do the comps say?