Solid Property based on the Numbers?

Question

Investment property about 6.5% for a 30yr mortgage. 20% Downpayment.

Mortgage would be $1600. Downstairs rent could go from $1500-$1750. Upstairs (separate space with kitchen would rent for $500- as I already have someone lined up for it.

Purchase price about 230k. So, after closing costs I would need roughly 55k cash to bring to the table.

Would like to know if this is even worth it? Thanks!

Denise Supplee · Answer

Hello Brett,

It is important to take all costs into consideration. Routine maintenance and unforseen maintenance costs; insurance rates (they are increasing all over), property taxes and vacancy rate. Then management of the property. And if you choose to save the cost of a property manager (I have done this), there is the aggravation factor. I have owned and managed properties for over 30 years. I finally have decided to let all but one go and now invest with others in syndications such as large apartment communities, trailer parks, and even a steel manufacturing plant. I wish you the best of luck and please, put your numbers through an ROI calculator to assess your investment. The worst feeling is investing in a property only to end up losing money and your peace.

Chris Seveney · Answer

Maybe.

What is the deferred maintenance? Was the property completely renovated or will it need new roof and windows and HVAC system in 3 years? Is it a rentable area or will you have months of vacancy? Number wise it does not look bad but this is with such limited information I would not go off of an opinion based on info provided.

Brett Michael · Answer

Hey all, we decided to not go with it since their realtor was unresponsive and I wanted the purchase price to come down approx 20-30k.

It should also be noted that this property is 100 years old and has had problems before- I kept on it since I was neighbors with the tenants who had been there for a year or 2.

I feel like the layout is good with good bones perhaps, but the electrical system/plumbing would concern me. Not to mention what else the home inspector would uncover.

Sahil Tadwalkar · Answer

I've evaluated properties with similar returns to yours. If you could get $1750 comfortably for the downstairs unit then you're looking at a solid levered CoC of14%. This is all assuming the rest of your underwriting is solid, taking into account insurance, capex, and misc. costs. If you're going for the appreciation play, then you might be fine with less cash flow.

What decision did you end up making?

Solid Property based on the Numbers?

Most Popular Reply