4/1.5 Buy and Hold deal

13 Replies

Hey Everyone. I was hoping you could help me analyze a property I put an offer in for. It'll be my first one, and I'd prefer something smooth to learn from, rather that a headache (but that's what everyone's looking for right?).

1,300sqft Single Family Home in Michigan

4 Bedrooms - Three upstairs, one downstairs connected to the living room

1.5 Baths - Half bath upstairs, full bath downstairs

Asking price: $63,000. Offered $55,000

Estimated rent: ~$1100-$1200/m

Taxes: $875/y

30y Traditional loan. 20% down.


Needs:

- Complete interior paint & wallpaper removal

- New carpet throughout

- Tear off of roof in next 5 years (6 layers of shingles)

- New furnace in next 5 years


Pros:

- Large square footage

- Corner lot

- Aluminum siding looks good

- Decent sized kitchen with newer (but different colored) appliances

- Newer windows

- Upscale neighborhood

- Good school district


Cons:

- Next to the highway, quite noisey

- The bedroom/bathroom configuration is a bit odd

- No garage (think michigan winters)


What do you think? Good first investment?

In my opinion it depends on the neighborhood. Is it worth the investment to add a garage when you flip it? Will the market accept less than 2 baths with 4 bedrooms?

I don't like a half bath for 3 bedrooms up.

What year was the property built??

6 layers of shingles??

How is that roof not caving in??

That is likely a code violation for your city or county the property is in. Due to weight and safety restrictions the most allowed is generally 2 layers. Anything above that starts buckling of the roof due to weight and support issues.

When you go to take that roof off in the 5 years you say expect to pay double to triple to replace of what a normal roof job is with the labor of ripping and hauling all of that off. I think you need to fix the roof TODAY if you buy it.

Hello brian.

Nice to meet you, and well done on making your first investment, my first questions in relation to your post is this:

1. Is the cashflow your are gaining from it (in the opening deal, which im guessing this was) positive or negative?

2. If it is positive will it cover all the calculated cost for repairs and maintenance?

@Brian Stieler  Hi Brian. I do not understand the bed to bath configuration. Is there any way to change the upstairs 1/2 Bath to a full bath?  Otherwise it doesn't make sense and the really bad thing is the roof especially in Michigan with snow etc. I have always run from homes on busy streets especially highways. Not safe for kids and the noise.  With all this, I wonder if you can get good tenants for your investment.  Good Luck. Tom 

1.5 Baths for a 4 bedroom house located in a good school district would bother me. What are the other houses rents in that neighborhood that are not near a busy street. For me the exception is when it is a cheap house in a "great" school districts. This would appeal to a single mom or someone's financials who suddenly changed who's trying to keep their kids in the same schools. If you are within $50-$100 of houses not on a busy street I think you are going to have alot of problems.

Originally posted by @Brian Stieler :

Hey Everyone. I was hoping you could help me analyze a property I put an offer in for. It'll be my first one, and I'd prefer something smooth to learn from, rather that a headache (but that's what everyone's looking for right?).

1,300sqft Single Family Home in Michigan

4 Bedrooms - Three upstairs, one downstairs connected to the living room

1.5 Baths - Half bath upstairs, full bath downstairs

Asking price: $63,000. Offered $55,000

Estimated rent: ~$1100-$1200/m

Taxes: $875/y

30y Traditional loan. 20% down.


Needs:

- Complete interior paint & wallpaper removal

- New carpet throughout

- Tear off of roof in next 5 years (6 layers of shingles)

- New furnace in next 5 years


Pros:

- Large square footage

- Corner lot

- Aluminum siding looks good

- Decent sized kitchen with newer (but different colored) appliances

- Newer windows

- Upscale neighborhood

- Good school district


Cons:

- Next to the highway, quite noisey

- The bedroom/bathroom configuration is a bit odd

- No garage (think michigan winters)


What do you think? Good first investment?

Looks too pricey IMO.

You also need to spend quite a bit on rehab. Rough estimate on what you mentioned would be between $8,000 - $12,000.

There are better numbers to be had in Michigan. Its very similar to our prices here in Ohio.

We can pick up properties in solid B class areas for $40,000 - $50,000 turnkey with $800 - $1,000pm in rent.

Just my opinion.

Thanks and have a great day.

ps. If its your first deal look for a very very basic cosmetic rehab. Paint and Carpet. Nothing too much more than that.

Thanks

Thanks for the replies everyone. I certainly agree that there's better out there, but originally felt like this one fit into the category of good investment. It's a decent size and price ($55k) for the rent, but repairs are a bit much. As an out of state investor, I agree the amount of work needed is high, and I could certainly find something more desirable for a renter. I'll keep looking.

Thanks again. Brian

6 layers of shingles?? How is that possible? That's gonna be an expensive roof to replace.

Is this a bank owned property or FSBO? Are you looking to buy this as a turnkey or something that you are going to get fixed up before you rent?

Regarding the shingles. I'm an out of state investor, and my realtor has been filming his walk through of the houses. He made a comment about how think the roof was, and just said "looks like 6 layers of shingles". I'm guessing it's not really that many. Regardless, we are/were going to have a property inspector look through the whole places.

So have you passed on the deal already? How long has it been on the market?

I passed on it today. After talking to a couple investor friends they suggested I could do better. So I'll keep hunting.

Originally posted by @Brian Stieler :

I passed on it today. After talking to a couple investor friends they suggested I could do better. So I'll keep hunting.

 There is always another around the corner.

Too many times I though I had the deal of the century and tide up all funds into only to see a better one come along 1 month later haha

Gotta love the roller coaster ride that real estate is at times :)

Brian in what city were you looking?

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