Pay more for better property or settle for property with issues

6 Replies

I am looking for 3/2 SFH in the range of $160-200k. I am noticing however the rent prices are very similar between both ends of the spectrum. The $200k house has cleaner finishes and would rent easier. However I am looking for a deal. I found a house sitting on the market it is updated but has the following issues:

1. Master bedroom is smaller than the other rooms

2. Master bathroom is small

3. No bathtub in house

4. House had foundation repair in 2018 with 10 year warranty (living room floors are a little wobbly)

5. Lot next door is empty with tall grass (potential rodents and future construction)

6. Sellers have also listed property for rent for $1650 and have had trouble renting it

Based on these issues, is it worth it still to potentially save $30k versus a similar type property given the rents are similar. Or does this sound like a disaster waiting to happen? Any advice would be greatly appreciated. The house I am looking at is 3226 San Paula Ave

Dallas, TX 75228

United States.

If anyone would like to look it up and provide feedback. Again, I am looking to potentially acquire this property around $160k as a rental investment and trying to determine even at that price if it is worth it given the minor deficiencies! Thanks

first run the numbers being very conservative, ask yourself how much cash flow you want, does it match the 1% rule at purchase price, what rehab you would do, ect. lets go conservative and say you can get 1500 in rent each month, at 160k thats close to a 1% rule, but not quite. how about cash flow are you wanting? what would the PITI be? basically run the numbers and find out for yourself if it matches what you are wanting. If your okay to cash flow negative 100$ cash flow on a property to get into the game and okay with it being close to a 1% rule and the piti is something you can manage then it might be a good deal for you to go on. every house has a number figure out how much you would pay for that property. also might be best to not post the exact property you are interested in because other investors might get interested in the same one then leading to competition. I am not interested just due to me not looking for a house in Dallas.

@Zachary Kingsberg , I cannot speak to these two properties specifically.

I would be looking at zillow, apartments.com, etc to see what other rentals in area look like.  $1650/mo is clearly too high if it isn't rented very quickly.  Looking at the comps should give you a better idea of what real rents are for either house.  Then as mentioned, you need to calculate backwards into what the price should be.

Personally, I don't like turn key properties.  I want something where work is needed, because there is margin to be made in having work done.  Turnkey means you are paying someone else's profit, and your cash flow is therefore typically lower.

Can't sell, can't rent typically means the price is too high. A quick look and the ARV is ~$180K. At $160K purchase price not a lot of meat on the bone. I would pass. All the best.

@Zachary Kingsberg the first thing you should do is nail down the rent. If if the seller is having trouble renting it at $1650, then that's a good inidcation that the rent is too high. I would talk to a property manager and get their opinion. I'd also get their opinion on the small master bedroom and bath. That could be why it's not renting. If the true rent is less that $1650, it might not cash flow well. Because of the high property taxes and insurance rates you have there in TX, it's hard to cash flow with less then a 1% rent ratio. Run the numbers conservatively to see what the worst case is.

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