First deal under contract

19 Replies

Hi all,

I've been reading BP for a while (lurking) and learning and am curently under contract on my first deal. I just wanted to share this on BP.

It's a duplex in Houston, 3bd/2br on each side. The neighboorhood is what I would call 'transitional'. The current owner paid $65k and says he put put $6k of rehab work into it. The units are in nice shape inside. My first offer of $72k was accepted, but then I found out during inspection that there is deflection in the foundation which will have to be repaired at some point (the engineer estimated the drainage work + relevelling would run somewhere around 15k). I changed my offer because of this, down to $60k. The seller initially hesitated but, given the facts, eventually accepted.

Both units are already rented, each collecting $600/month. Tenants have to take care of yardwork and minor maintenance, according to the lease at least. The rent is well below market as identical units one street over rent for around $700-$750. Not sure why the owner rented out so low - he told me his reasoning was that a lower rent is less likely to attract troublemaker tenants - not sure of the logic on that, but it is what it is for now.

Phil

Congrats Phil and welcome to BP!

Sounds like a pretty good deal to me. My guess is that the previous owner went with the low rent to be sure he got it rented out, at least that seems to be the case with our first property.

Kelly

@Phil Damjanovic

Great job on your first deal! That's exciting stuff. As my market is heating up over here in CO I'd love to hear you found your deal. I'm looking to locate ways investors are getting the deals right now since competition/speculation is really starting to heat up.

@Steven J.

I used HAR, Zillow, and Trulia websites to search. I did a map view search and put a filter on the search that filtered for MFs under 100k. I then worked my way through the ones that were in blue collar or better neighborhoods. I found a lot of dead ends - a lot of properties that looked good online but looked like garbage when I actually drove to visit them (usually in poorer neighborhoods). Unfortunately just about every 'investment' property in a good area was way overpriced relative to potential rental income. Whereas I can find 2-3 properties in transitional areas that might interest me every month, in well-developed areas that number has been 0 so far. Would love to get some finds in better areas too.

@Phil Damjanovic congrats on your first deal!

In regards to the lower rental rate, I would consider how good of tenants they are. If they pay on time and take good care of the property it may be worth it to remain at the lower rate and keep them happy vs run them off with higher rates and then risk getting a tenant that is a headache. Good tenants are a value asset to an investment strategy.

Good luck!

Congrats Phil - sounds like a very good pick up! Did you pay all cash for the property or did you finance it?

Raise those rents ASAP in my opinion! An extra ~$2400 a year in your pocket

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