Investor · Riverside, CA · Member since 2019 · 141 posts · 40 votes
Strategy: Buy & Hold, Live in for 2 years, remodel it while living in it, then move out.
I've been all excited since I "found a gem" but now after running number over and over and over again I break-even only if I manage it myself after moving out.
The property needs the following: - Flooring - Currently it has a stinky-smudgy carpet
- Cabinets - Old, falling apart, discolored stain
- Countertops - Currently it has laminate jagged up counters
- Outside-Inside Paint - Stucco needs to be painted on the outside. Inside is dirty, discolored walls.
- Bathrooms - Super dirty bathtub, toilets.
Single Family Home Purchase Price: $355,000
FHA: 3.5%
Mortgage: $2200
Rent: $2400
Comps Avg: $370,000-$440,000
Rehab Cost: $20,000
Is it a good Deal or Bad deal?
Before moving ahead and accept the counteroffer I wanted to be sure that I'm getting myself into something that its worth it.
This would be my 1st BRRRR, so I'm a bit nervous before jumping in.
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
7y
@Alfonso Aramburo Zepeda First thing that pops out here is the rent to purchase price ratio as well as the purchase price itself.
One thing I'd want to bring to your attention when you do move out and try to do refinance, the interest rates are going to way higher than 3.5% of the FHA, and the interest rates for investment properties will wipe out any cashflow and may lead you into the negative real.
You never want to be paying additional rent with the tenant for your mortgage. Not a nice feeling...😟
Really your initial intuition was right, as when you start to run numbers over and over again you particularly want to listen to your gut and RUN 🤗
Sounds like a good deal... in Southern California.
Where is this property located? I don’t know if I would convert the garage. A huge reason people rent a house over an apartment is the garage space and the yard space.... remove those and you’ve shrunk you’re potential tenant pool by a lot. I would go for it. Give it five years and you’ll be glad you did. Plus you’ll be living there for 2.... rents will rise over that time period. Appreciation could be a factor.... time will tell.
I believe historically properties keep appreciating in our area (except for 2008-2010) I’m focusing in the Inland Empire close to my residence.
Thing is, previous owner insulated the garage already and put carpet. So, “minor” remodeling would be needed.
I would agree with you in regards to prices and rents raising. Doubt you’ll ever see them trend downward over long periods of time.... lots of people moving out that way.
I think this could be a midiocre deal right now that could end up being a great deal 5 years from now. Also, take everyone’s advice lightly but be super weary of the advice given by people that don’t live/operate in your market when it comes to Southern California.... it’s a whole different animal here....
Investor · Santa Barbara, CA · Member since 2013 · 658 posts · 315 votes
7y
As a fellow Californian I can say you have your head in the right place. Live in it, rehab it yourself, rent out rooms, convert the garage. You have to be creative to make it pay for itself, then hold onto it for appreciation of rent and value.
Investor · Riverside, CA · Member since 2019 · 141 posts · 40 votes
7y
@Brant Richardson
Unless I had 250K sitting in the bank would be a way different story. You got it right, trying to be creative to at least break even with rentals where the market is now.
Rental Property Investor · Martinsburg, WV · Member since 2017 · 111 posts · 81 votes
7y
@Alfonso Aramburo Zepeda what are you currently paying for living space? Do you rent?
I've read a lot of the comments and while this isn't the deal of the century, it could be a good starter home in a desirable location that you'd be able to rent for more than you pay when you decide to upgrade it branch out.
Personally I'd look for a duplex if this is your first place in order to take full advantage of the FHA loan, but I realize those aren't common or cheap in CA.
Rental Property Investor · Shakopee, MN · Member since 2015 · 985 posts · 374 votes
7y
Although the numbers are probably a little closer than I like. It wouldn't be terrible to get you started. You could always rent out a room to help lower your cost. Banking on appreciation is always a gamble, but it could potentially pay off in the long run.
I rent for $1750+utilities. 2 bed, 1 bath house with garage and huge backyard. Duplex would be my first option if I found a Duplex in B- area/calm neighborhood. Most of the ones I've found so far are in C+, C- areas in my area. After buying the house I'll jump into a Duplex and expand the search within a 25 min drive from me. Average type of duplex I like here goes for around 500K.
$1 per sqft vinyl installed sounds to cheap to be true or at least too cheap to be quality.
If the cabinets are falling apart, will refacing keep them alive?
Paint seems way too cheap and something I typically hire out since the labor is usually cheaper.
If it’s dinghy, sounds like you offered too high to start. Rescind your offer and try again in a month maybe. Good luck.
If it looks like work, many will be put off. Make it worth it with a lower offer.
-Justin’s
Correct, I'm just accounting for materials as I've been in the remodeling business for over 2 years already and have somehow the knowledge to get it done. I work for a countertops company as my full time job, so I get a big discount for material as well. One of my buddies who has a remodeling contracting license specialized in cabinets will help me revitalizing those cabinets as a way for him to start with his business & have a project to show for future customers.
About painting I will consider sourcing that out if it's not that expensive.
Strategy: Buy & Hold, Live in for 2 years, remodel it while living in it, then move out.
I've been all excited since I "found a gem" but now after running number over and over and over again I break-even only if I manage it myself after moving out.
The property needs the following: - Flooring - Currently it has a stinky-smudgy carpet
- Cabinets - Old, falling apart, discolored stain
- Countertops - Currently it has laminate jagged up counters
- Outside-Inside Paint - Stucco needs to be painted on the outside. Inside is dirty, discolored walls.
- Bathrooms - Super dirty bathtub, toilets.
Single Family Home Purchase Price: $355,000
FHA: 3.5%
Mortgage: $2200
Rent: $2400
Comps Avg: $370,000-$440,000
Rehab Cost: $20,000
Is it a good Deal or Bad deal?
Before moving ahead and accept the counteroffer I wanted to be sure that I'm getting myself into something that its worth it.
This would be my 1st BRRRR, so I'm a bit nervous before jumping in.
Brookfield, WI · Member since 2016 · 191 posts · 108 votes
7y
Keep looking for your BRRRR, but you could look at the flip potential on this one, depending on ARV and comps...run the numbers that way and see if it works.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
7y
@Alfonso Aramburo Zepeda yes because age, finish level, and location also matter. Mid 2000s build in orangecrest and that is a $2,700+ rental. 1910s in Downtown more like $2,000-$2,200. Something that has jerry-rigged additions even less
Rental Property Investor · Martinsburg, WV · Member since 2017 · 111 posts · 81 votes
7y
@Alfonso Aramburo Zepeda I'd probably aim for one of the C-class area duplexes, but I might have a higher tolerance for stuff than you. You'd own it, so you'd pick your neighbor, if not the neighborhood, and when you moved you cash flow a lot better. A bit of austerity now could give you a leg up in a couple of years when you expand.
And honestly what is the difference between B- and C class, honestly? Especially when talking about duplexes. Using commercial terms for non-commercial properties conflates things imo.