What is a good deal?

Question

First time buyer and ready to take the plunge and buy my first LT rental. Buy box is 3+ bed / 2+ bath SFH in the $250k - $300k range. Depending on the exact suburb rents will range from $2200 - $2600. I've been preapproved for a fixed 30 yr at 7.25% with 15% down. Aiming at ~$400+ gross so I can factor in maintenance / capex as we go. For all you seasoned investors, does this look good, decent or run like hell?

Jon Shilalis · Answer

One repair or one month vacant and you wont be an investor you will be a worker paying for your investment.

Be patient and wait for something that will really cash flow and pay for repairs and upgrades. Or search off market or start working with wholesalers who can bring you better deals.

Drew Sygit · Answer

Understand that if you are looking at a Class A property, this is probably a good deal. You'll be trading stability for lower returns.

Class B is what most investors have traditionally targeted. They provide a decent amount of stability & return.

David Fern · Answer

Don’t buy anything at full retail. Get something at a 15%+ discount off full market value. That’s making money upfront.

All the other advice you’re getting is sound, especially about buying in good locations, but make sure to be “all in” at a 15%+ discount. EG: yes it’s good to analyze cash flow, but don’t ignore developing the skill set and relationships that can help you capture $40-60k equity up front at your price point.

Get really good at assessing property values and rehab costs before buying. If you’re like me, you might have to ask local investors for help with this.

Jaron Walling · Answer

@Ryan Sherring Any experience fixing up houses? If you target the B/C class neighborhoods and find a good distressed property you could BRRRR and create your 15% DP via remodel (value-add). You're local and should know what a good deals look like. At a minimum I'd run the numbers in other locations, and see if the strategy works in your market (I'm sure it does).

Ryan Sherring · Answer

Thanks for the insight. Areas I'm looking at are in good schools and from what I can tell, have longer tenants. One of the reasons I want LT rentals. Schools are very good and these would be entry level houses in these suburbs so will be easy to exit if needed. Ideally I'd hold them long term though. TBH, I'm not seeing any properties in this market that would give me $400 net. I'm factoring in 6% capex and 6% for maintenance. Also that PMI is ~$100 a month.  I could go to 25% down and get to the $400 net. I have enough capital that I could potentially get 4 or even 5 this year in that price range. 2, maybe 3 if I go to 25%

Kevin Franklin · Answer

On first sight, it doesn't seem like a good deal, maybe if it were $400 net rather than gross. I'm assuming you're self-managing, since you didn't mention property management.  With $150-$200 net, it doesn't leave enough buffer for maintenance / capex, not to mention the potential turnover cost, if your tenant decides to part ways after 1 year.  One month of vacancy will exhaust your entire year's cashflow.

However, on the flip side, as rates eventually drop, you're in line for a reduced mortgage to help increase cashflow.  If there's some value add opportunity with this home, you'll be able to make some renovations here and there to increase rent / cashflow.

Chris Seveney · Answer

Looks promising, but not enough info to call it a good deal yet.

You’ve got the basics—price, rent range, financing—but a good deal comes down to more than cash flow on paper.

Here’s what actually makes a deal solid:

Net cash flow after ALL expenses (PITI, maintenance, vacancy, CapEx, PMI)

Strong rent-to-price ratio (1% is ideal, but rare in today’s market)

Desirable tenant area (low vacancy, stable employment, solid schools)

Exit options (Can you sell or refi without getting crushed?)

At $2,200–$2,600 rent on a $250k–$300k home with 15% down at 7.25%, you might be tight once you factor in real expenses. You’re thinking right, but don’t just aim for $400 gross—focus on what’s left over after reality hits.

Run a full pro forma. If you wouldn’t buy 3 of them, don’t buy 1.

What is a good deal?

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