I'm currently under contract and there are several things I don't like about the place, but only grab it because inventory is hard to come by. This is a pocket listing I got from a realtor I work with.
1 Story Traditional Equity Sale.
Purchase Price $96k Cash
ARV $110k - $120k
Rental income $1000- $1100, (2% is hard to come by in Las Vegas.)
Walking distance from pretty good high school.
Things I don't really like about it.
- Small Kitchen
- Dining Room Table would be place in the kitchen corner which is only about 5ft x 10ft.
- Only standing shower in master bath, no tub.
- One sink in master bath.
- Normal sliding closet door in Master Bedroom.
- Electric Appliance, only water heater is gas.
- Garage is attach to the house, but you have to walk out the side door and get in the house via front door.
I could flip or rent, if I rent, I would get 9.5% Cash on Cash return, not including vacancies & repairs.
Monthly cashflow on rental would be between $855 - $955.
What do you think about this deal?
Monthly cash flow $855-$955 per month on $1000-$1100 rent? Where do I sign up!
Need to know the monthly taxes & insurance. Then can figure out if it's a deal. your vacancies & repairs would bring it down 2% I'm thinking so cash-on-cash return 7.5%.
i just did the math with the 50% rule. your cash-on-cash return is 5.5%.
you would have some equity though so your net worth went up instantly.
Here the number I got that doesn't include vacancies & repairs.
Property Tax: $60.25
Power, Gas & Water: Tenant Pays
No Property Manager (Self Manage)
Rental Income: $1000 - $1100.
Without vacancies, repairs, income tax, my pay back period would be 10.5 years.
Not my best deal, 6 months ago, my payback period was 8.5 years, but inventory is so low, hard to find that gem.
If your cashflow numbers are accurate, renting would be the definite way to go. Since you paid cash, and there is not a ton of potential equity in the home, the cashflow will bring more income. Not to mention you are considering this a gem in your area, so you might as well hold onto it.
At least you could get one under contract!
Here's a few more things to think about.
1. Is the laundry located in the garage?
2. What type of roofing does it have? Asphalt shingle doesn't seem to last as long here.
3. Make sure you're looking at the rent rates for the immediate subdivision. Parts of Henderson can change quick if you cross a street or rail line.
Thanks for the feedback @Phillip Dwyer !!!
1. Is the laundry located in the garage? - No, it's inside the house in the hallway area to the bedrooms.
2. What type of roofing does it have? Asphalt shingle doesn't seem to last as long here. - Tile Roofing, looks to be in good condition, but didn't really inspect it yet.
3. Make sure you're looking at the rent rates for the immediate subdivision. Parts of Henderson can change quick if you cross a street or rail line. - Yes, I looked on the MLS for the rental rates as well as Craigslist and Rentometer. $1000 is the low end.
In that case, it sounds like you may have gotten a decent price on this property considering the market. Good luck!
Have you thought about flipping it right away and keeping the rehab money in your pocket? Since you have equity and you can probably list it higher than comp value and still sell it. Due to low inventory and high demand you can probably find a desperate buyer.
With AB284 being reconsidered right now and talks of it being amended there will likely be new inventory introduced to the market soon. This will soften the market. To what degree is open for debate. I don't think prices will drop but they might. If they do you could buy another property and probably get a better deal.
With that being said flipping it now may allow you to sell high and then buy low again.
First off, the rehab flip scenario some are talking about will return you little to nothing! With $102k posted all in and at best $120k resale, your $18k spread will go away with acquisition costs, holding costs, resale costs, and seller concessions. If you cleared $5k I would be surprised and there is no way in hizell I am investing over $100k to make $5k.
On a buy and hold, your gross rents of stated $1100 at best equates to $660 left over based on a 40% operating cost ratio (which is more of a better case scenario). That is a 7.7% return and you could easily do better than that more passively.
You also mentioned the 2% rule was not possible in Vegas. While I agree your market has gone super competitive and prices have increased double digit % over the last year, you can still do better than your 1% ratio.
Just food for thought.
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