With this little information, it is almost impossible to be able to tell you if the numbers are off on this property. I would have a number of questions before I would feel comfortable giving any sort of advice on this.
1. What are your yearly taxes?
2. How much is your insurance?
3. How much are you calculating for CAPEX, maintenance, property management, and vacancies?
4. Is there an HOA fee?
5. Are there any repairs that will need to be done upon purchasing the property?
6. Are you planning on refinancing at any point?
7. How much would your mortgage be for?
8. What interest rate?
9. What length of term?
10. Why not?
It sounds like you have a good amount of money to play with and staying in your comfort level could be beneficial, but it seems like you could do more with your money than just purchasing one property.
When I run the numbers for your deal and put in 10% for CAPEX, 10% for maintenance, 10% for property management (even if you don't use it initially), 7% for vacancies, $250 (estimate) for taxes, and $150 (estimate) for insurance I have you coming up with $356 a month of cashflow. That would equal a grand total of $4272 per year. Based off of your 180k initial investment, that sounds like not enough money for me.
Taxes - $2020
Insurance - $700
CapEx+Maint - $2200
HOA - no
initial repairs - none
Refi - maybe
Future mortgage - uncertain, targeting $100K
Term - 30Y
So net (yearly) would be around $4-5K I think
So I'm thinking, like you, not enough money.
This looks thin to me. However, it's pretty hard to find good deals in decent numbers in this market right now.
No deal is better than a bad deal.
Yeah, I think it's thin, unless there's a value play targeting some serious appreciation. but $180K purchase price would make me a little nervous for a long term buy and hold. Not sure exactly what area its in and how many square feet the property is in, but that might be a little high in price per square foot. ie. what happens if the market corrects back dowward in a few years and it's valued at $130K-$150K (not a huge issue if you're planning a truly long term of 10+ years rental) just depends on what your goals are. -Mark
Price per square foot is a little over $100 if memory serves. I’m coming to the conclusion that this isn’t a good deal. My challenge is that I’d like to buy in ABQ as that’s where we’re going to settle in a few years, I’m somewhat familiar with ABQ as I’ve spent some time there, but I’m investing from afar and I’d like something that’s move-in ready. I may be searching for a holy grail that doesn’t exist.
So how about approaching it another way. What's a good cap rate in ABQ right now? I'm assuming I'm at least asking one of the right questions.
Backing into it, what would be a good target property cost if rent is expected to be about $1200 per month?
My goal is to have and hold for several years, and the location is in ABQ NW or Rio Ranch SE, roughly the Paradise East area, give or take.
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