Bad, Good or Great Deal?

2 Replies

Hi BP,

I will be submitting an offer to purchase my 7th property soon.

I'd appreciate it if some of you could give me your opinions as to if it's bad, good or a great deal.

It's a 2 bedroom 1 bath, 1100 square feet, 1 story, single family house. In addition, it's a Freddie Mac foreclosure. Built year is 1945 (approx), vinyl exterior.

Purchase price $23,250

Closing Cost $2000

Financing is 70% LTV @ 5.25% fixed for 5 years, amortized over 20 years (portfolio lender)

Repair Required $5000

Monthly rent $550 a month

Property Taxes $910

Property Management 10%

Annual Capital Reserve $1000

Annual Repair & Maintenance $800

All utilities will be paid by tenant.n

Thank you.

Have you checked the wiring?  1945 + Copper wire = ?  

Pro Forma

23,250 + 2k closing + 5k rehab = 30,250 invested

yearly rents = 6600

minus 35% (10% PM, 10% Capital Reserve, 10% Vacancy, 5% repair) = 4290 operating income

minus operating expenses

-910 taxes

-350 insurance

= 3030

3030/30250 = 10%

Seems fine as long as you don't run into any surprises in regards to repairs and rental rates

This could be a better than average deal in an appreciating area and worse than average in a depreciating area. The cash flow alone doesn't justify the purchase in this house without knowing the demographics

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