I really want to get in to renting out properties. I live in a small city(35k) in Wisconsin. I've found a few single family properties I'd like to buy and rent out. Here is the best one I've found.
It's a 3 bed 1 bath 2 car detached in a decent neighborhood. The person that use to own it died(in a nursing home). The property is assessed at 70k and they want 35k. The property needs paint and carpet and hopefully no major repairs.
I made a little spreadsheet from the financial analysis article and another on calculating rentals on a napkin. So here are the numbers:
I believe my numbers are conservative. I put 20% down to avoid PMI, then calculate 15K which should cover paint, carpet, and some minor repairs.
This gives me about 1.45% of rent to purchase price and repairs. I like this property compared to others do to its low cost. If this turns out to be something I do not like, I feel I could unload it easily.
I've found a few similar to this in my area although most are HUD cases. One is a VA owned property.
Using a purchase price of $30k and applying the 50% rule (50% set aside for all expenses not including property management and mortgage), you are looking at cash in hand at the end of the month of $203. This does not account for any upfront remodeling costs.
Investors are generally looking for $100 per month per unit. So you are good here. Even at a full price offer, you are looking at $183 per month. Still good.
The problem here is that you loan is going to have to be financed in-house. In other words, a lender will not be able to sell the loan to the secondary mortgage market because is it less than $50k. This may increase your interest rate and affect your end numbers. Make sure you get pre-approved before submitting an offer.
Also make sure you get comps from a realtor, it will give you a better idea (don't rely on that alone) of what the REAL value is, not just assessed value.
Chad maybe look into local portfolio lenders
@Chad Day - See if the now owner, I am assuming the heirs, are willing to hold a mortgage on it. Give them a small down payment so they have some cash in hand, offer them a low interest and balloon payment in a certain amount of years, or if they are comfortable, extend the entire loan out.
I have a couple of these....they are the best to have :)
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