Should I buy it or keep looking?

4 Replies

What would you guys do? I have an option of buying a rehabbed SFH 3br, 1 bath for $175,000. It is in a class B neighborhood and all the repairs are done on it. Comps are from 185-210. Just needs a power wash on the siding and some new plants out front. Hers is my question: I already have a renter for it. One of my drivers wants it . The rent is $1500 month and I would cash flow $354 monthly. He would sign a lease just like everyone else.

Every one i take to show them what they think of the house, they say the  house needs work, which it doesn't, just cosmetic on the outside. 

My theory is I can get the house rented asap and have a positive cash flow right away. I know the guy can afford it because he is paying the same price now in a worse location, plus he gets a monthly pension from the military which easily covers his rent. 

What would you guys do? buy it , have an instant renter, positive cash flow right away  or keep shopping around for a higher price house in a better area with a little higher rent and do the tenant screening stuff, etc ? 

There's no way I can speak to your market, but in my market, *generally speaking*, your rent as a percentage of your basis in the house declines the more expensive the house becomes. I have no idea if $200k is a high or low price to buy a house where you are, so there's really not enough information there. 

As for the renter, you really need to consider whether the numbers work irrespective of having a "ready tenant". The driver could change his mind; he could crap out after a month; etc. The property needs to work no matter who it is rented to. If you can cash flow $350 at that rent level, and it is super-easy to get that rent, without knowing much else it sounds like a decent deal. But there's a lot of vagaries here. 

I can actually get $1650 month , i gave him a discount because he works for me for the last 4 years and he has a wife and kid. After speaking to his current landlord, he has never been late on rent and keeps the place spotless. He just dosen't like the area he is in now that why he wants my place , much better area.

I see some obvious problems. To begin your rent to value on the property is too low. Positive cash flow will be difficult at best. Second renting to a employee is very risky. It establishes a relationship in which one, employment, may impact landlord/tenant. This is a situation which has negative implications which I would not risk. If employment relationship turns bad you end up with a bad tenant, if tenancy goes bad you end up with a bad employee. Choose your poison.

Rent too low and not a tenant I would choose to have. I would probably pass on this investment and I would never rent to a employee.

Thanks for your input @Thomas S. Other people tell me the same, do not rent to employees.

My theory is , he still needs a place to live if he ever quit or was let go. But i hear you 

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