I am a brand new investor! I have done months of research and analysis on properties in the Saint Roberts, Missouri area (65584) and have found myself continuously landing on the same property. The property is a 4 plex near the military post in the area. Using the criteria of buying at 80% of the asking price ($159000) and using relatively conservative numbers when calculating my expenses I am looking at close to 400 dollars per month cash flow. I used the standard 5% vacancy, 5% repairs, 10% capex, and 10% management. Now I can tweak these numbers and wind up with a couple hundred more in cash flow by managing the property myself and working the sewer and water into the tenants rent. With all that being said the property has been listed for over a year now. This is what worries me. If this is a good deal then how did a rookie investor such as myself realize this before anyone else. Or am I missing something. Any help would be appreciated.
It’s probably overpriced or in a bad area
Are they rented? Is the cash flow and ROI working out as you predicted?
@Joe Hines all 4 units are rented and the cash on cash return is great. The cash flow I predicted is much lower than what the property managers annual report reflects. The area is not bad and with the military post in the area renters are plentiful. I believe the seller is motivated to sell due to financial difficulty but that is solely based off of speculation. This is all what makes me skeptical. Seems too good to be true.
Get it under contract for a favorable price and do your diligence. The current owner should produce financials and it sounds like you have those already since you are able to see what the PM is reporting. Talk to the PM and see if they are managing other property in the area. That is a great source of info.
Maybe you got lucky!
@Joe Hines I currently have all of last years reports from the Pm and they all look good. Minimal required maintenance and high occupancy rates. I believe I’ve done the leg work and it looks like a good deal. Thank you for you input. It is much appreciated.
Sure Robert! Anytime! Good luck!
Sometimes you find a nugget of gold at the bottom of the ocean. Get it under contract and then scour the earth to find out what is wrong with it. You might not find anything and you could have found a good one that others overlooked for some reason.
@Bryan Devitt I believe that will be my way forward. I am housing hacking and using my VA loan and from what I have heard the VA is usually very strict with the inspections. That should play in my favor.
My friends that have gone the VA loan route have all complained about how much of a pain it was because of the stupid little stuff they wanted fixed, so that will definitely help you. Good luck on your first deal, I hope it all goes great!
@Bryan Devitt thank you!
If you spend your REI career finding deals that work on paper, and then look for a reason not to grab it, you will not make it in this career. Either it works, or it doesn't.
Is the property actually located where it is indicated on the MLS listing, have you actually been to the property?
Data entry into the MLS isn't always entirely accurate so you can find deals where for example a property has been overlooked for many months and is interpreted as "overpriced" by everyone that assumes the property is where the MLS indicates on it's map. Then if you take the time to actually locate it you might find out it's really in a much better neighborhood, that the agent entered the wrong map number, you can lowball them to get a deal.