Advice - To buy or not to buy

3 Replies

I have a deal on the table to buy a 2 unit building in West Garfield Park (West Side, say Pulaski and Madison) for $110,000. With section 8 tenants who have been there for a while and expect to be, it makes $2,000 in rent per month. It's a turnkey with fairly new HVAC, roof and rehab work. My potential partners don't think West Garfield Park is a neighborhood that will see any type of development or appreciation in the next 5 years and they may be right. But I see it as an easy way to make additional money. The mortgage might be around $775 when you factor in PITI, so you're talking a net of more than $1200 per month alone! How do you suggest I go forward? Should I hold off and use that 30K down payment and look for a better deal in a possibly sooner-to-be appreciating neighborhood? Or just go for the easy money now?

Originally posted by @Chidi Osuji :

I have a deal on the table to buy a 2 unit building in West Garfield Park (West Side, say Pulaski and Madison) for $110,000. With section 8 tenants who have been there for a while and expect to be, it makes $2,000 in rent per month. It's a turnkey with fairly new HVAC, roof and rehab work. My potential partners don't think West Garfield Park is a neighborhood that will see any type of development or appreciation in the next 5 years and they may be right. But I see it as an easy way to make additional money. The mortgage might be around $775 when you factor in PITI, so you're talking a net of more than $1200 per month alone! How do you suggest I go forward? Should I hold off and use that 30K down payment and look for a better deal in a possibly sooner-to-be appreciating neighborhood? Or just go for the easy money now?

Your partners are idiots. Find new partners.

@Chidi Osuji

 The cash flow looks great, but it really depends on your tolerance for high crime areas, which the property is in.  Consider what happens if people don't want to live there anymore, your exit strategy, and damage to the property that might occur doing a vacancy. The fact that it is not an appreciating area for property values also places risk for an exit.  It just depends on your tolerance for risk.

@James DeRoest

 not so fast... the partners probably know that the area is going to be management intensive there is a reason these properties sell for these kind of rent to price ratios.. Risk = Reward and generally they never bring in the cash flow that is touted over the long haul might be good until the first annual inspection by hud.. or hud tenant moves on etc etc.

The people I see succeed at these price points are usually locals who run these for a living not investors looking for passive income.. so depends on what kind of investors the OP is

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