Brand New Investor- Need Help looking at the numbers!

6 Replies

We found a potential property and were hoping some of you season veterans could take a quick peek at it and let us know what you think about the breakdown of the numbers?

We want to go into contract tomorrow..

list $309.000
we are putting 20% down at 4.375 interest.
realtor "says" we can get $900 for one unit & $1500 for second for a 1 bed garden & 1 bed plus den for 2nd floor.
i think thats a bit on the higher side of rent but b/c the property has been completely gutted and rehabbed by investors it is possible for this "hotter neighborhood"
if we estimated on lower end of rent bout $600 & $1400 we put the out door cash flow at $140 per door.
we are putting an offer in but not exactly sure what to go in with. thinking $285-290.000
if you could take a look i would greatly appreciate it as we really like this property & hope it looks good enough that the numbers make sense.
i plugged numbers into an investment property calculator & canshow a spreadsheet to look at if that would give you a better understanding.
would so appreciate any advice you have!!
thanks in advance!!

I'm not sure if you have heard of the 2% rule but this doesn't even qualify for the 1% rule....If your purchase price was 300,000 1% would be 3000 a month which you aren't even close to getting to.....I would just pass and find a better deal

Philip is dead on, this is a pass at that price, maybe a deal at 200k. Bottom line the numbers are too tight to allow for repairs, vacancy, etc.

I would not expect to see 2% rule properties at those posted rents, but as already mentioned if not even the 1% rule is being met then pass.

@Asha Holly,

This is not a good scenario for an investor.  This price sounds to be retail; therefore, there is no room to allow for tenant failures.  That said, you will find yourself with a loss for the majority of the time.  I have experienced this issue personally; fortunately, I am able to perform most of the repairs to save, but this tactic is not advisable for the true investor.

Good Luck!

Make sure you are not pushing top market rents or you will create a bunch of turnover all the time. Unless this is an area where demand is super high and there is not hardly any rentals. Then if there is not rent control you can keep pushing the market.

Some areas are only cash flow, some cash flow and appreciation, and others a spec market with appreciation only and little cash flow.

"i think thats a bit on the higher side of rent but b/c the property has been completely gutted and rehabbed by investors it is possible for this "hotter neighborhood"

Are their pictures of the complete rehab, permits, etc. Talk is cheap especially by those trying to sell something to someone. Full gut to me would mean all new electrical, insulation, plumbing, roof, windows, heating and cooling systems, and more. If they just threw up drywall and put in new countertops and made the "eye candy" look good then it's not a gut redo. They left all the old expensive crap hiding in the walls.

thankyou all SOO much for your insight & expertise. there is So much that goes into this. i looked on rentimeter & it says we are "reasonable" to ask up to $1000 for the 1 bedroom. & up to $1500 pushing 1600 for the 2 bed.

if we bid lower at 280-285.000 it could possibly make sence IF we get those rents. i am at wrk now but will do anither reasses of the scenerios when i get home. i do believe it was a total gut rehab new everything that Joel mentioned.

thanks again everyone i absolutely am thankful for you sound advice!!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here