What is a good deal to you?

19 Replies

I have known a guy who would buy SFR and hold them for few years then sell them for profit. And did really well.

So he would tell me that no matter what market is doing find a good deal and get it. He never really specified what was a good deal...

What is a good deal to you ?

For me,  I guess,  if a house is 50K and brings a rent of 1k per month, that is an excellent deal! If a house is 100K and brings in 1K in rent but all the mortgage, taxes are covered, it is an ok deal. If I lose money than its a worse deal, not necessarily a bad deal in the case if I am hoping to sell it later when it gets equity or market goes up.

What about you?

1% rule (after rehabs) in a neighborhood that will rent easily to well qualified tenants and show strong signs of appreciation.

Why are you going into REI? Your answer can be found there. The answer should be financially based...and, should be based on YOUR financial situation...not anyone else's.

A good deal for you, for others reading this, or for me, are all different. Whatever those answers are, those numbers (with $$$ in front of it), says what their good deal is.  Nothing else.

Originally posted by @Joe Villeneuve :

Why are you going into REI? Your answer can be found there. The answer should be financially based...and, should be based on YOUR financial situation...not anyone else's.

A good deal for you, for others reading this, or for me, are all different. Whatever those answers are, those numbers (with $$$ in front of it), says what their good deal is.  Nothing else.

 I know what you mean. But you know, the more I talk to people and the more I ask questions, the more I learn and the more I understand how little I know. So I am so grateful for this forum! There are so many wise and smart people here!

Originally posted by @Mary Jay :
Originally posted by @Joe Villeneuve:

Why are you going into REI? Your answer can be found there. The answer should be financially based...and, should be based on YOUR financial situation...not anyone else's.

A good deal for you, for others reading this, or for me, are all different. Whatever those answers are, those numbers (with $$$ in front of it), says what their good deal is.  Nothing else.

 I know what you mean. But you know, the more I talk to people and the more I ask questions, the more I learn and the more I understand how little I know. So I am so grateful for this forum! There are so many wise and smart people here!

 Never stop asking questions.  Every question you don't ask, the answer is always the same, "NO".  So ask it...you might get a "yes" instead.

Ease of entry. 

Everything else plays a part in the decision, but that is the main thing.

Property must be a multi unit, must produce the minimum $100 (preferably more) per door from day one with 100% financing.

Originally posted by @Thomas S. :

Property must be a multi unit, must produce the minimum $100 (preferably more) per door from day one with 100% financing.

 Do those deals with 100% financing exist in Canada? I think they are non existent in the US now days

Originally posted by @Mark Holencik :

Ease of entry. 

Everything else plays a part in the decision, but that is the main thing.

 Totally agree! A lot of mortgage brokers wont lend on anything below 50K and sometimes 90K...

So I have been torn, do I buy a house that will get financing but its 90K (900$ rent), or do I try to get a regular bank approve me for 50K (500$ rent)....

I can put money in my 401K and average 10-12% a year. If I can find a property that makes me about the same or more than that I consider it a good deal.

Originally posted by @Mary Jay :
Originally posted by @Mark Holencik:

Ease of entry. 

Everything else plays a part in the decision, but that is the main thing.

 Totally agree! A lot of mortgage brokers wont lend on anything below 50K and sometimes 90K...

So I have been torn, do I buy a house that will get financing but its 90K (900$ rent), or do I try to get a regular bank approve me for 50K (500$ rent)....

 Ease of entry to me is not going to a bank for anything except to deposit checks.

@Mary Jay

"Do those deals with 100% financing exist in Canada?"

No, I use a HELOC for my DP.

However if you do not base your calculations using a hypothetical 100% financing (regardless of your DP) you are not attributing any value to your dead equity. This would be deceptive since you are not considering th eoportunity value of yur dead equity. Not accounting for dead equity is how investors paying dowm/off mortggaes convince them selves they are actually making money. Equity produces artificially high cash flow numbers that must be at least partially deducted. By using 100% financing numbers you attribute a value equilivant to the prevailing mortgage interest rate which although far below the actual opportunity value of cash it at least is something. 

Originally posted by @Alan Pederson :

I can put money in my 401K and average 10-12% a year. If I can find a property that makes me about the same or more than that I consider it a good deal.

 How do you calculate that? Lets say you put 10K down on a 100K house. Do you expect rent to be 1000$? Or if you want 10% then you would charge 1100$? Or how do you calculate 10-12% a year?

@Mary Jay

Different people look at it different ways. Some say if you cash flow $100/door, that's a deal. Others say $200, $300, etc.. per door. Then there is the 1%, 2%, and so on rules. In that scenario a $100k house rents for $1K for the 1% rule, $2k for 2% rule, etc...

All depends on what you're comfortable with and your particular market.

@Mary Jay , We originally were looking for a way to make some passive income other than our 401K's. We were only making $2 a month on $40k sitting in the bank. $2 dollars wasn't going to cut it so we started looking at real estate. We invested about $35k to buy a rent house (down payment + repairs) and make about $500 a month off of it. (gross return = 17.14%) I know there are going to be repairs in the future so I know I won't be able to keep all of this. This isn't as much as I would like to make on this deal but it's a lot better than the $2 I would be making if I just left the money in the bank. This house has went up 30% in value since we bought it 3 years ago.

Thank you guys so much for helping me out!

Its very kind of you!

@Mary Jay I agree with what @Joe Villeneuve said that a good deal depends on the individual investor’s goals. 

I also agree with what @Thomas S. stated about looking at it in terms of being 100% financed to see if the return makes sense. Pretty much anyone can make cash flow when they put enough cash down on a property, regardless whether it’s a good deal or not.

For us, a good deal is when we can acquire control of a property with 100% financing and and have 25% equity and still have it cash flow at least $200 a month. And yes they are still out there. And yes they exist in Arizona. We purchased 3 a few weeks ago that will follow these numbers.

@Mary Jay It's different for everyone. For me, it's not just about the numbers. It's about getting a fair price for a home in a good neighborhood. Will not buy anything cheap anymore due to experience. Community is everything and the honesty and integrity of sellers are too. 

Originally posted by @Rachel H.:

@Mary Jay It's different for everyone. For me, it's not just about the numbers. It's about getting a fair price for a home in a good neighborhood. Will not buy anything cheap anymore due to experience. Community is everything and the honesty and integrity of sellers are too. 

 Isn't "getting a fair price..." about the numbers?

Originally posted by @Rachel H.:

@Mary Jay It's different for everyone. For me, it's not just about the numbers. It's about getting a fair price for a home in a good neighborhood. Will not buy anything cheap anymore due to experience. Community is everything and the honesty and integrity of sellers are too. 

 So, if I read this correctly, your priority list reads like this:
1 - Community..."community is everything..."
2 - Honesty and integrity of sellers..."...are too..."
3 - Good neighborhood
4 - Fair Price

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