Buying from other investors

3 Replies

I am working with another investor who is getting out of the business. I've reviewed his 18 rentals and they all rent for $450 to $700.

Initially...looking at his asking prices and running through the SFR analysis, I didn't think they were so good...but I was using a 15 term with 25% downpayment.

Here's an example.

Price:  $39,000

Downpayment: $9,750 (25%)

Closing: $1,500 (Going to use a line of credit on based on stock portfolio)
Pay LOC based on 30 year term: (Prime - 0.25% = 3.00%): $127/month

Income: $6,072 (NET with 8% vacancy)

Expenses: 
Property Taxes: $1066
Property Insurance: $450
Repairs: $700
CapX: $500
Mortgage: $1548

Annual Cash Flow: $1828
COC: 16.25%

My spreadsheet:  https://www.dropbox.com/s/e51inxidg4m0um0/analysis...

How does this look?  Thoughts?

Kevin

I don't get your numbers. Assuming $700 rent on your $39,000 purchase, you get a NET of $6,072? Gross potential rent is $8,400. 

Cap EX and Repairs look too low, IMO, on a lower priced place unless there is a new roof, new appliances, new HVAC, new water heater, etc.

The rent on that particular example was only $575.  

Overall, all the houses were at their "deferred maintenance" stage in their life.

Couple that with the lower rent levels and I opted to not pursue any of them.

Kevin

Kevin, just curious.... why rental model -vs- fix & flip or even seller finance options for resale?

We sell a decent percentage of our properties via seller finance (contract for deed) which offers a very healthy return, quick sale (easy marketing) and little/no risk versus that of a rental scenario.

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