looking at a deal...what would you do?

Question

Hi all,

Thanks in advance for the advice.

Quick backstory: I just moved to KY, will be here for three years, and am trying to acquire some distressed properties as a first time investor to turn into rentals before leaving. I am currently in an apartment, and looking for a house-hack opportunity initally, but came across a single family FSBO that might be worth picking up as an investment (not my residence). Here's the info, I could use your feedback...

-2 bed/2bath nicer house in a rough part of town. But on the edge of a big redevolpment iniative.

THE CONS:

-It is the nicer house on the street, which is the opposite of what we're supposed to look for.

-The price is fairly consistent with the market, not a superb deal considering the neighborhood and street.

-Not much room for forced appreciation.

THE PROS:

-The owner is motivated and there may be some room to negotiate.

-even at the current price, with conservative rent numbers, the cash on cash ROI is about 7%. Bringing in about $250/month. Which is pretty good for me.

-easily passes the 50% rule.

THE BUY?

-I'm thinking of doing a cash purchase. What would you do?

Ryan Penne · Answer

Thank you so much for the advice. That property actually went under contract before I had a chance to make an offer. BUT got another offer accapted same day! So looks like we'll be trying to do a little live in rehab in the near future

Meghan McCallum · Answer

If its not yet a great area you may have tenants who will need EXCESSIVE training and screening. My only problem with rougher neighborhoods is the time the people who are happy to live there take up. If you are buying for cash flow (and that $250 is cash flow, not just above and beyond the debt service) only with just a HOPE of appreciation it wouldn't be bad. But, I don't have enough total info to make a suggestion that's worth following up on.

For first purchases I'd start with something a little safer.