Cash Flow property question:
Seller has a property listed for $39,000. I saw the property, and estimated $65k in repairs. This wouldn't work as a flip, but what about as a cash flow property.
ARV - $72k
Repairs - $65k
Monthly rent $950 - $1000
Seller is willing to go as low as $25k because I stated due to the repairs that $39k doesn't make sense.
I was at less than $5k because it's in terrible condition.
Does it makes sense as a Fix 'n Hold?
How do I approach seller financing topic that includes PP and repairs?
In order for anyone to chime in, we would need to at least know what your monthly cash returns are and what your cash on cash ROI might be.
@Tonya Jones If the ARV is $72K all fixed up, just buy a 3/1 in the same neighborhood for $72K. There’s no reason to spend $5K on the house, $65K on repairs, and you’ll have holding costs for a $65K rehab so you’ll be out more than $72K by the time you get it rentable.
A investment of this nature only makes scenes if you can refinance based on the ARV and get all your cash back out. That will likely produce positive cash flow.
$72K in equity based on a opportunity value of 10% is worth $600/month. Estimating expenses in the 50% range will place this property, rented for 1K, with a negative $100/month cash flow. You are buying your cash flow and the property becomes a liability. Leverage is the only way you can make this a worth while income investment.
Thank you all. I didn't go with the purchase. I realized it wasn't a good deal even though the price is really low.
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