How does this townhome look to you ?

Question

Is it priced well? Will this be a good deal ?6436 Macon Rd, Memphis, TN 38134 | MLS #10185084 | Zillow

Looking at these numbers :

The thing that I like is its in a good area. The current tenant is paying 1550 , but there are other properties in the same community available for rent at 1400, which makes me think If I should calculate my numbers for 1550 Or 1400 ?

Also , normally I keep 5% as vacancy rate , but for this case I did 4% as its a desirable rental area

Is 7% expense conservative for such townhomes?

Is 6.2% Cash On Cash a good deal worth looking at ?

Taz Zettergren · Answer

@Saurabh Kukreja it all depends on what your goals are. If you are a long term buy/hold investor that's wanting to invest passively this is a great deal in today's market. While it doesn't meet the 1% rule it's in a stable, desirable area that'll perform more consistently for you over time so it's worth the tradeoff in my opinion. If you are getting a true turnkey home that hit's the 1% rule there's a very high probability you are in a more challenged area where the residents aren't as consistent over time.

In regards to the numbers you're calculating they seem to be relatively conservative in my opinion, to be direct it's more than I use for homes that are in good condition. Feel free to reach out if I can be of any assistance, best of luck!

Jordan Ray · Answer

When buying a turnkey property. The best way to buy a property is by using the 1% rule.

Saurabh Kukreja · Answer

I think it depends on the strategy right , I am still a beginner and wanted something more turnkey rather than BRRRR.

How would you think of something form that perspective ? My goal is Long term and positive cashflow with appreciation.

Jordan Ray · Answer

I would pass on this deal. I personally wont buy a property unless it has a minimum 40% Cash on cash return. (Best done by a BRRRR) Also, rents are coming down slightly and properties are taking way longer to rent out. There is plenty of supply so I would either pass on this or write them an offer that makes sense from your position. Let me know if I can help in any way!