Help for a newbie ... good deal?

Question

I'm looking to get into real estate investing. I've read many many posts here ... GREAT STUFF! But ... I can't find anything that has positive cash flow (by 100.00 per door) after paying the mortgage. What do you think about this...

An updated single family house that I hope to get at about 30% below the appraised or FMV. I can get a 12 year mortgage at 6%. But, I would only make about 100.00 over the mortgage amount.

House Value - 44,000
Bid              - 31,000 (owner is motivated)
Mortgage is about 420.00 including taxes and ins.
Rent is about 525.00
Hoping that the 100.00/month takes care of repairs.

My payoff would be in the house when it's paid for... right? Does that make sense?

Thanks in advance!

George P. · Answer

BP is all about 50% rule, which this property won't pass. Regardless of any rules, $100 is a tiny spread. A large unexpected repair will throw you off big time.

Jim M. · Answer

the 50% is a good rule to follow when purchasing rentals.  that would mean that 260 a month would go towards vacancies, repairs, taxes and insurance leaving you 260 for the payment but the payment would be roughly 300 so you would be paying 40 bucks a month out of pocket give or take.

Tyler Blackwell · Answer

Mike,

I look for properties that flow at $100/door as well, but over a 30-year term! If you are able to pay mortgage, insurance, taxes, utilites (W/S/G), and account for some vacancy, and you're still making $100/month for the 12 year mortgage, I would pull the trigger. 6% on a 12-year loan seems criminal, but if the numbers work out, they work out.