Rental Property too good to be true?

13 Replies

I found a property in Texas (Duplex with an extra unit so a Triplex) that has rental incomes of $2375/month, recently renovated (like 2 years ago) and it costs around $150k, am I missing something? putting 20% which is 30k it would net around $1525 after the mortgage payment and taxes. Even if I pay some management it would generate around $1000/month of cash flow, which is why I'm intrigued since this seems like a no brainier but I'm new to real estate investing and I want to ask for all your experts advice 

Updated over 2 years ago

I found a property in Texas (Duplex with an extra unit so a Triplex) that has rental incomes of $2375/month, recently renovated (like 2 years ago) and it costs around $150k, am I missing something? putting 20% which is 30k it would net around $1525 after the mortgage payment and taxes. Even if I pay some management it would generate around $1000/month of cash flow, which is why I'm intrigued since this seems like a no brainier but I'm new to real estate investing and I want to ask for all your experts advice Update on numbers: 150k Home 20% down payment 30k interest rate 4.5% property taxes: 2k/yr home insurance: 1500/yr Monthly Rents: $2325 Unit 1: $900 2bd 1ba Unit 2: $825 2bd 1ba Unit 3: $600 1bd 1ba Monthly expenses: monthly payment would be $913 (includes insurance, taxes, P&I) Vacancy: $193.75 Repairs: $100 PM: $200 CapEx: $150 =$1,556.75 CF: $768.25

Originally posted by @Albert Gutierrez :

I found a property in Texas (Duplex with an extra unit so a Triplex) that has rental incomes of $2375/month, recently renovated (like 2 years ago) and it costs around $150k, am I missing something? putting 20% which is 30k it would net around $1525 after the mortgage payment and taxes. Even if I pay some management it would generate around $1000/month of cash flow, which is why I'm intrigued since this seems like a no brainier but I'm new to real estate investing and I want to ask for all your experts advice 

 Albert, you have to factor in a vacancy factor (about 8-10%), repairs & replacement reserves. By the time you do that, your actual cashflow will probably be around $500-$600/month, which is still not bad.

How is the area or location?

@Albert Gutierrez

Sounds like a good deal to me based off the numbers.

Monthly Income

$2,375 rent

Monthly Expenses

$650 mortgage (estimated)

$594 (assuming 25% capex, repairs, vacancy, PM)

$300 Insurance/Taxes (estimated)

$1,544 Total Expenses

= Monthly CF of $831

As other have said, make sure there aren't other expenses like lawn care, utilities, laundry, etc.

Originally posted by @Sid Jones :

@CJ M.

It’s Texas- double your property taxes and insurance. 🙄

This looks about right if you’re not In AustIN.

As noted - do your due diligence and it’s likely a real deal.

He did, he put $3600/yr for insurance and taxes I will update my post with more accurate numbers 

Originally posted by @CJ M. :

@Albert Gutierrez

Sounds like a good deal to me based off the numbers.

Monthly Income

$2,375 rent

Monthly Expenses

$650 mortgage (estimated)

$594 (assuming 25% capex, repairs, vacancy, PM)

$300 Insurance/Taxes (estimated)

$1,544 Total Expenses

= Monthly CF of $831

As other have said, make sure there aren't other expenses like lawn care, utilities, laundry, etc.

This actually seems pretty accurate, I actually have the projected property taxes for 2019 which are $2,000, and I'm basing the Insurance on $1500/yr so based on this we can get a more accurate picture

Originally posted by @Albert Gutierrez:

I found a property in Texas (Duplex with an extra unit so a Triplex) that has rental incomes of $2375/month, recently renovated (like 2 years ago) and it costs around $150k, am I missing something? putting 20% which is 30k it would net around $1525 after the mortgage payment and taxes. Even if I pay some management it would generate around $1000/month of cash flow, which is why I'm intrigued since this seems like a no brainier but I'm new to real estate investing and I want to ask for all your experts advice 

Cleaner Look:

Update on numbers: 

150k Home 

20% down payment 30k 

interest rate 4.5% 

property taxes: 2k/yr

home insurance: 1500/yr 

Monthly Rents: $2325 

Unit 1: $900 2bd 1ba

Unit 2: $825 2bd 1ba 

Unit 3: $600 1bd 1ba 

Monthly expenses: 

monthly payment would be $913 (includes insurance, taxes, P&I) 

Vacancy: $193.75 

Repairs: $100

PM: $200 

CapEx: $150

=$1,556.75

CF= $768.25

Better get confirmation on T-12. I get similar deals all the time and they fall apart once the seller understands he/she has to prove their numbers. Not saying this isn't a good deal, but investing 1,000 miles away without knowing the area is seldom a good idea unless you do a tremendous amount of due diligence. In some of areas I work, you'll spend so much time and money on evictions that the actual annual CF will be marginal. 

Originally posted by @Guy Gimenez :

Better get confirmation on T-12. I get similar deals all the time and they fall apart once the seller understands he/she has to prove their numbers. Not saying this isn't a good deal, but investing 1,000 miles away without knowing the area is seldom a good idea unless you do a tremendous amount of due diligence. In some of areas I work, you'll spend so much time and money on evictions that the actual annual CF will be marginal. 

I just got the 12 month P&L looks like this is a flood area and needs flood insurance which does drop my numbers by a bit but still manageable