Hello just wanted to introduce myself to everyone. I am from Knoxville, TN. My parents and I are a real estate team and we just bought our first house to rent out and eventually sell. We bought the house for 390,000 and the seller is paying 10k in closing. We also got a 7.5% commission from the 380,000. We felt like we got a fantastic deal but I was just curious, would it be better to take less commission and lower the price or take more commission and raise the price of the home? Any other advice would be much appreciated! Thanks!
Hi @Patrick Goswitz ,
If I am understanding it correctly, you guys are getting the 7.5% commission as the buyer's agent side (which btw I have never heard of one portion of a sales commission being that large!). I'm not a realtor, but it would seem to me that it just depends on how much you want the immediate cash on hand vs. paying a little bit more on a monthly mortgage. I would take the higher commission to get more cash, as the mortgage payment increase is very minimal at that point.
Secondly, did you say you were planning on renting out a house that you are purchasing for $390,000?? If so, it may be very difficult to actually produce any kind of income on a monthly basis when all said and done. There are many posts and blogs about this here on Bigger Pockets, but search "1% rule", and you'll see what I mean. It's not a hard and set rule always, but it is a solid guideline - in your case, you would more than likely be way off of this guideline. Basically, you will be hard pressed to be able to rent it for the amount you need for it to be considered profitable at this price point.
Hope this helps!
We’re doing a BP meetup Nov 30th at Barleys in the old city at 6:30 pm. If you’re new to investing you should come. Networking is a very important part.
I am a firm believer in lower leverage. I feel like it makes for a safer investment. I would take the 10k in equity over cash but it depends a lot on what your plans are and how aggressive you want to be.
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