Is my fear legit or just analysis paralysis...

3 Replies

Made an offer on a quadplex- listed at $240,000, property manager says 3 units rent for $650 and 1 for $750 because its furnished. Its in a town of about 12,500.  Population has been fairly stagnant.  Numbers look great IF I can keep it rented. Not really a commutable area to a major metro area...  suggestions?  I can still withdraw my offer if I need to.

Your fear is quite legit. If you've never managed before you need a property manager, or at least one to do tenant placement.

All four renting for what you say, those numbers look great. Any one unit goes vacant, and your great has turned to, okay/good, two are vacant and you're out of pocket.

Making something cash flow isn't just about the numbers. Good luck.

Any immediate/ or soon to be need repairs?

Numbers look great. I would ask the PM for the tenant's history to determine how long they have been there and see if they have been paying rent on time and take that into consideration. With a town that small, it might be hard to fill vacancies, but I would just increase my vacancy savings rate from maybe 8% to 15-20% to account for that. Even if you do that, you would still get 10-12% CoC with 25% down.

@Alex Deal , to me those numbers look marginal. That is barely over a 1% deal (rents just over 1% of purchase price). So, while I'm sure it would have positive cashflow if things go reasonably well, it doesn't look like a smoking deal by any means.

What makes you want to invest in this area? Is it because its local to you?

Are the current rents at market rate? Could you refresh the units and bring rents up at all?

What industries are prevalent in that market? Is there oil/gas exploration where there could be call for shorter term housing at higher rates? Are there tourist draws for skiing where you might AirBnB a unit or two?

The deal on its own looks "ok", but from there how well it does is about what YOU do with it. You might just strive to become a very professional landlord or you might look to employ other strategies to turn an ok deal into a very good one.