Help a Newbie Out!!

[Jaimee Chazen]

Paralysis by analysis!!!   Would you buy it??!? 

80k LP 3 bedroom 3 bath townhome in a rural college town with no HOA. Currently rented for 965 a month and taxes are about 1500 a year.
Little to no area growth per web data. But I feel like there are some recent news things that may bring some movement to the area.  
the home built in 2007 is in good condition, and could probably get closer to 1100 a month with a few updates.   will get a full inspection before hand obviously. 

[Trevor Mays]

Hi Jaimee,

How are you financing? Are you using a property manager? Are there solid rent comps, actuals not listings, that support $1100/mo proforma? Before deciding to buy, it would be worthwhile to put together a cashflow analysis for the length of time you plan to hold this property...is your return projection high enough for your needs? Then stress test it by assuming flat rents, longer periods of vacancy, higher maintenance costs, or any other input, and seeing if it still meets your return requirements. Hope this gives you some thoughts to consider. Best of luck!

[Michael Smythe]

Did you use one of the BP Calculators?

[Journey Toole]

@Jaimee Chazen

Super surface level, it looks like it could be a good deal, dive deeper. Have you seen it? Has your agent seen it? What needs to be done to make it able to grab that pro-forma rent? If you’re over the 1% rule, that’s pretty solid in todays markets. What’s the area like?

[Jaimee Chazen]

Quote from @Journey Toole:

@Jaimee Chazen

Super surface level, it looks like it could be a good deal, dive deeper. Have you seen it? Has your agent seen it? What needs to be done to make it able to grab that pro-forma rent? If you’re over the 1% rule, that’s pretty solid in todays markets. What’s the area like?

I have seen it, to get to the higher rent would removing the carpet in the main level.  The carpet in the whole house is new(less than 6 months) but not good quality. There is a unit that was just sold that is renting out to students 400 a room, but I am not sure I want to go the per room way.  The area is probably c plus class, if I had to rate it.  Lower income southern college town.  

[Jaimee Chazen]

Quote from @Michael Smythe:

Did you use one of the BP Calculators?

Thanks for pointing those out!!! I checked them out and played with some numbers.  Doesn’t cash flow as well as I was hoping with the ‘variables’ but if I can get my financing right it will cash flow.  

[Journey Toole]

@Jaimee Chazen

Sounds like a safer base hit then. If the numbers work, it hits your cashflow/COC number, get it!

Like you said, get an inspection, talk to an agent if you don’t already have one, while under contract verify the tenant (copy of the lease, copy of a rent roll/rent ledger, an estoppel agreement, etc).