Qualifying Deals at Current Market Levels
looking at the deals, i cant understand how people make their money in buy and holds at these price levels.
purchase price 420k, 3 units, total gross rent 4375/mo. Taxes 5500/yr, insurance 5500/yr, water 2500/yr. With 20% down at 7.5% for 30 yrs, principal interest, taxes, insurance is 3100/mo. + 250ish water a month + grounds keeping 100/mo= 3450 total expense. This excludes property management, which i were to so myself. This leaves out with about 900 cash flow or $300 per unit per month. The theme is roughly the same across the industry. How can one go in the business at these levels?
Most Popular Reply
Hi Ken,
Buying turnkey does mean less cashflow in todays market on average. I have seen the investors in my area making great returns on rehab-to-rent, build-to-rent, and build-to-sell. Obviously with these deals, the ARV needs to make sense and the location of the property is crucial to force enough equity.
One of the best methods I have seen is buying a house with a lot that has enough space to develop and then subdividing the lot to build. My friend is the COO of a company doing this and making over 100% returns.