Single family home 1200 sq ft
Owes 103,000 on home, has a quit claim deed to home.
Homes similar have sold 114,000-120,000
Owner says need new carpet and to pay off new a/c unit $5400 Loan and a few other repairs
He’s asking $109,000
Could rent for 900-1000
Is this a bad deal?
*cash flow 148/month
Cash on cash 5.3%
Return on investment first year -26%
Bad idea? Doesn’t want to do lease option because he wishes to sell and house shop this year or subject to.
Not quite enough information to really help.
A couple of things to be aware of: make sure all your profit numbers are after all expenses. Your 148 per month sounds a bit high for a sfr at just under 1%.
Also, you don't mention how much cash you are putting into the deal, just percentages don't really tell us much.
If you can put this into one of the BP calculators, and share the results it would get you better support.
- With the information you have provided, it is hard to tell if this would be a good first deal. On the surface, it looks marginal.
- Given the repairs you noted, it appears you are effectively paying full price for this property.
- Does your cash flow figure include repairs and vacancy? I would budget about $250/month for those things. If that puts you at a negative cash flow, I wouldn't buy this property. If $148 is a true cash flow number, then it is worth looking deeper.
There is a way to turn this into a very good deal. (This is a more difficult route but could be worth it.) The owner can't reduce his selling price much due to the size of his mortgage. However, you could put an option to buy on the property and see if you can help the seller get a principal reduction, allowing you to buy the property at a lower amount. That can be a lot of work with the lender and babysitting of an anxious seller. You would also want to be sure to have a solid contract so you don't lose the deal after doing all the work. It is a more advanced strategy. Only you can decide if it is worth the brain damage to go down that path.
Final thought. Quit claim deeds can be problematic. Be sure you close with a reputable title company / attorney.
Hopefully my comments don't demoralize you. Success in real estate comes to those who keep moving forward. Keep pushing.
In the (paraphrased) words of Winston Churchill "Never, Never, Never, Never, Never give up."
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing