1% deals in Tuscaloosa, AL

4 Replies

Calling all Tuscaloosa investors,

I am looking into a few houses in Tuscaloosa.  One property I am particularly interested in is $129K and would rent for $1200-$1300 (i.e. ~1%).  3 bedroom 2 bath in the Forest Lake area, newly renovated, granite countertops, new roof, etc.  Should I keep looking for deals with better cash flow, or is a 1% property a decent deal in this area?

Thanks for the help,

Drew

Be sure not to confuse gross profit with cash flow...run the numbers on the BP rental calculator and you'll be able to answer your question based on your investment criteria...

Drew, that's probably a decent deal, but keep in mind who you're gonna market to.  Will this be more for a family or will you try to rent to students by the room?  (Obviously you can't discriminate on who you rent to, but you would feature different aspects of the home in your ad.)  Don't forget your property taxes and insurance in your math; these are usually not paid through escrow.  Also vacancy, maintenance, holding costs (like utilities), and depending on the age of the house, capex (capital expenditures).  If you have any other questions, feel free to text me.

Thanks for the feedback. Ran the numbers in the BP calculator. Cash flow came out at ~$200.  This was using lower end of rents and conservative expense numbers.

Originally posted by @Drew Brock :

Thanks for the feedback. Ran the numbers in the BP calculator. Cash flow came out at ~$200.  This was using lower end of rents and conservative expense numbers.

So depending on your return requirements, you can now determine if you feel like you should look for a better deal and return. Assuming your projections and numbers are all inclusive and accurate, a conservative $200 cash flow per door would be a baseline for many investors...meaning that would be the minimum required return. Another important number from the BP calculator is the COC or cash-on-cash return. How much is each dollar that you are investing going to return. Our baseline is 12%. If it's getting $200/door and 12% COC, we'll consider it. We'd likely only make an offer if that was the best option in the market however. Depending on how competitive Tuscaloosa is at the moment, you may want to compare several deals and see which ones come out best overall. You might just surprise yourself and find a $400/door multifamily deal out there somewhere! Doubling your return per door, while still only buying one roof.

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