Odessa, TX · Member since 2016 · 47 posts · 14 votes
I have this 3/2 "turn key" rental house in Odessa Tx tied up with seller but would like a 2nd opinion if I should move forward with it.
Offer Price- $110,000
Appraised - $113,000
Tax Appraisal website - $90,544
Down Payment- $30,000
PITI = $700/month
Property Manager is confident it can rent for $1300
(Confirmed it also on RentOMeter.com)
Needs:
- new roof
- picket fence
- could use a new coat of paint in the living room.
The appraisal has me hesitant...
Thoughts? And Thank you!
-Alonzo
[keyword trigger: Permian Basin west Texas Advice help oil field Odessa Midland 79762 asset investment real estate single family home SFH meat and potatoes]
-By the time you install the roof, take care of other repairs needed, pay your down payment and closing costs, your cash outlay is north of $40000 for a couple of hundred dollars in cash flow
- No equity in the deal. By the time you do a roof in paint, you are more likely in a negative equity position
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
9y
My $.02:
1) $700 is low on the PITI part. Im thinking closer to $800. Taxes in TX are 3%, which is around $300 a month. Not sure what type of 'smoking finance' deal you are getting, but 5% amortized interest would be $430 for the PI part.
2) "Turnkey" does not usually mean: Need new roof. A roof, depending on the size of the house, can cost 10k+. Do you have any quotes on the roof by someone that does roofs?
3) Have YOU done your own due diligence to determine what rents are in the area? NEVER rely on a property manager for what you THINK it might rent for. Although it MAY rent for $1300 a month, it MAY also stay on the market awhile until that person comes by. A more realistic number could be $1100 (or even less) if you don't want to turn the property every year. I usually take the 'low' end of Zillow as I can find good tenants FAST that way. Then I 'boil' them like lobsters over time. ;-) My average stay is 4 years. :-) Turnover is a HUGE cost, especially if you have a property manager in the middle. :-(
4) If it needs a new coat of paint in the living room, it probably needs a new coat of paint EVERYWHERE. Budget $1000 for interior paint. ;-)
5) How old is the house? If it is over 20-30 years, your maintenance budget needs to be ready for all kinds of possibilities.
6) Property managers will USUALLY take your first months rent PLUS 10% of all rents received to place a new tenant. That will seriously cut into your 'profit'.
If it was me, I'd get a roof estimate and then renegotiate the price. IF all the other numbers you state are true, I'd move forward.
Odessa, TX · Member since 2016 · 47 posts · 14 votes
9y
Thanks Alan Grobmeier , must be my awesome credit score. I appreciate the advice.
Mortgage payment shows $709 @ a 4.62% interest rate
Banks numbers:
Principle and Interest showing - $452.45
Taxes & Insurance - $257
= $709 / month
(I'll call bank again to confirm numbers)
No quotes on roof yet
I did call property Manager in my area an they said 10% from day one per month.
$1,300 is accurate in my area
Built - 1957
Gross living area - 1627sq ft
Land dimensions - 7440 (62x120)sq ft
Thanks again!
-By the time you install the roof, take care of other repairs needed, pay your down payment and closing costs, your cash outlay is north of $40000 for a couple of hundred dollars in cash flow
- No equity in the deal. By the time you do a roof in paint, you are more likely in a negative equity position
Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
9y
Alonzo Ramirez
Hey there,
I have a few rentals in Odessa and midland. Want to give me an idea of the location of this property, and I can give you a good idea on the rental amount. It sounds like your about right, the only thing that has me concerned is the 1600 sq ft size but only appraised for 109k. I typically see the houses in the areas I would be confident in buy and holds, tend to go for 90-110 a sq ft. So if the house is in a lower economic neighborhood, you may have increased turnover.
10 percent is correct on most PMs in the area. No first month rent. Trower will drop price to 8 once you have 3 rentals.
As far as deal goes, I think Greg nailed it. Your investing a lot of capital for not a ton of cash flow.
With the property age I would be concerned with the maintenance. Definitely not turn key if it needs paint, and a new roof. Usually, insurance company will not touch it and hence you won't get financing if it needs a roof. Have your insurance company go out and check it out. It'll be a free inspection for u.
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
9y
If you are also living in the area, just manage it yourself. You'll stay in control and save a bunch of money. My main beef with PMs is that they only profit when there are problems - turnover, repairs, etc.
I have a much longer version of that story, but the bottom line is to just manage it yourself. If you live locally, there's no reason not to. If you do really good screening, the tenants won't take up much of your time.
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
9y
@Alonzo Ramirez, I managed up to 9 properties while holding down an engineering career that required me to travel around the country (and sometimes around the world) with more frequency than I desired. You CAN do it. You need to put systems in place where you have minimal interaction with tenants. For example, I used home warranties as my first line of 'defense' against maintenance issues. Although about $45 a month, that is much less expensive than a property manager @ 10% plus 'issue' costs. I use ACH to get my rent and have only had ONE late in over 9 years.
Today I am 'semi-retired' and still don't have much to do with my properties. It takes me longer to get my paperwork together for my CPA than it does for me to manage my places.
Odessa, TX · Member since 2016 · 47 posts · 14 votes
9y
Alan Grobmeier Sue K. Greg H.
Turns out the house can't be insured because of the roof. Would yall still go through with this specific deal after a new roof is installed by seller? Sweetens the deal but keeping emotions out of it.
Sugar gives me headaches anyways...
Logan Turner o yes the house is 1600sq ft and it shows on the tax page as 1,234 sq ft... would this be a benefit or more of a problem? Other then a Smaller tax bill I'm curious if city will seek back taxes?? And it's the neighborhood behind Mr Gattis in Odessa. And I will be going through Trower.
Off market deal by the way.
Odessa, TX · Member since 2016 · 47 posts · 14 votes
9y
@all
realtor is currently awaiting paperwork from insurance Company stating that roof is uninsurable but asking if I'll still be interested if roof is fixed.
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
9y
@Alonzo Ramirez. I picked my 'strategy' because I don't know what the future holds AND the fact that you can keep tenants LONGER in a SFR vs an apartment complex. Apt complexes are transient in nature.
A former partner and I owned a 4 plex. WAY too much hassle for me. I am not their 'daddy'. For me it was way too time intensive. Especially when you look at the overall profit. My former partner now has 32 'doors', but he doesn't do anything but real estate. He is a former Navy SeaBee and does most of his own repairs. It works for him. We have 2 opposite business models and they both work. ;-)
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
9y
@Alonzo Ramirez. IF the property was in a good school district, I'd probably be interested in it if it was in my area (using your numbers). I know some have said this isn't a good deal, but it REALLY depends on your real estate goals. An 'all-in' at 50k with a 5-6k positive cashflow per year is still over 10% cash on cash return. I don't know where you can get a 10% return that doesn't have way more risk. You just need to mitigate your risks as much as possible.
Odessa, TX · Member since 2016 · 47 posts · 14 votes
9y
@Alan Grobmeier even though you mentioned that it may be a hassle, id still like to be into multifams. This SFR I'm talking would be my first rental property, down the road from my primary residence and looks comfortable to me. But would have goals to be invested in a 4plex+. but as of now, the deal will not go through unless she:
Installs new roof
termite treatment
and gonna see if she'll lower the price or credit me at closing to fix some drywall damage that the house has.
...other then this, I think this would be a good opportunity to experience being a landlord (with property management) and finally putting into affect the knowledge that I know, no more analysis paralysis of me. But I do stress again, 4plex+ or small apartment complex would be great for me and my future endevours.
what are y'all's thoughts about it affecting my DTI? and whats the % that would put me in a good position for my future investments?
Rental Property Investor · Midland, TX · Member since 2016 · 186 posts · 180 votes
9y
I would pass on this one if I were you. I have 3 SFR in Midland/Odessa & I think you can do a better deal on the price/equity side of things.
The rent seems about right to me & things are taking off again in the oil patch, so the demand will be there.
I just think you can find a better deal that'll give you a higher ROI. It may require renovation, but you should get a big discount on the price due to the condition.