Evaluating the deal listed below. The big thing with this, other than the normal deal analysis, is that it's listed as having Asbestos exterior siding (on PVA website). The house has vinyl covering the exterior (not sure if this makes a difference). Would you buy a house w asbestos exterior siding covered by vinyl??
List Price: $42,500
Offer Price: $31,875, requesting lender to pay all title costs (to keep loan amt w/in limits)
Gross Monthly Rent: $650
Vacancy Loss (@8% or 1 month/yr): $52/mo
Cap-Ex (@10%): $65/mo
Property Mgmt (@10%): 65/mo
Property Taxes (at current PVA; will likely go down after purchase): $83/mo
Ongoing Repairs (@10%): $65/mo
Insurance (estimated): $75/mo
Total Monthly Expenses: $405
15% down, 30 year loan, 5% (high estimate) interest rate, P&I: $145/mo
TOTAL EXPENSES: $550/mo
TOTAL ESTIMATED MONTHLY CASHFLOW: $100/mo
REPAIRS NEEDED FOR RENT-READINESS - Budget: $5,000 out-of-pocket
Outside: replace deck; fix holes in vinyl siding (a few of them).
Kitchen: replace (gas) water heater; buy refridgerator + range.
Living Room: re-do floors (cheap vinyl stuff) and some windows.
1 Bathroom: buy/install sink; fix/replace tub; re-do floor (cheap tile).
2 Bedrooms: re-do floors (cheap vinyl stuff or carpet); buy/install closet doors and rod
Estimating $5,000 to do it all. Might be a little more, depending on who I use. I will not do any repairs myself.
CASH OUTPUT: $4,781 down + $5,000 rehab + $1,600 closing costs = $11,381 outlay.
CASH FLOW: $100/month x 12 months = $1,200 annual cash return.
Cash-on-Cash Return: 10.54%
@Mark S. Hi Mark. RE: Rent Projection: Is that a conservative number? Also how old is the property? How's the area? A,B,C?
Jordan Thibodeau, Check Out My BP Blog | https://www.biggerpockets.com/renewsblog/author/jordanthibodeau/ | Podcast Guest on Show #74
I bought and rehabbed a property with asbestos siding. I painted it and left it as is. Property sold very quickly and asbestos siding wasn't an issue even with inspections. Asbestos covered with vinyl is even better. It helps with insulation and since it's covered no one should have a problem with it. It does depend on the type of neighborhood. The one I flipped was in a lower priced neighborhood. If you're in a nicer, more expensive neighborhood buyers could be pickier.
Salvatore Lentini, Mission Real Estate LLC | http://www.tenyearmission.com
I agree with @Salvatore Lentini . If it's in good shape, and especially given that it's already covered up, it wouldn't bother me - especially for a buy and hold. If you're flipping, some buyers might freak at the term without knowing the actual risks.
@Jordan T., that is the median (and average) rent according to Rentometer.com. My realtor thinks it could be a tad high; he was thinking more like $600. I'd really like to do a nice job with the rehab and am hoping I can fetch $650, maybe even $700.
The property is 50 years old. The neighborhood is probably C.
@Salvatore Lentini , thanks for your feedback. I'm glad to hear the asbestos isn't an automatic deal-breaker. This house is in a lower-priced neighborhood. On that street, the average house has an assessed value between high $50K and low $70K.
@Ben Skove , I just read the other three threads you linked to. Thanks for that!
Def don't worry about asbestos siding if vinyl is covering it and you don't have to remove any of it.
I would consider putting 20% down to avoid mortgage insurance instead of the 15% you mentioned.
Property taxes more than likely won't decrease if this is a distressed sale.
Don't plan on getting more than $600 rent if that is what your realtor is telling you. Especially if it is in a "c" type area. Rents will be pretty much the same and the ought your description or repairs it doesn't sound like you are doing much to separate your property from the others.
Definitely plan to spend quite a bit more than $5000 if you aren't doing the work yourself. I would budget for double that. The mAterials won't cost a ton but the labor will add up.
Also make sure that those rents don't include you Payjng for any of the utilities. Water, gas, electric, garbage, etc.
I personally don't think this is a very good rental opportunity. Sounds like it might be better to flip. I would see if comps are selling around the mentioned assessed values of 50-70k or higher than you should be able to make some money fairly quickly if you can buy it and fix it for around 40k and sell it for 60k ish.
@Beau Ryan , thanks for the feedback. It's funny you say that the $5k is low. My significant other (who is not a real estate investor, but is excited about the possibility) said the same thing (and, no, I'm not calling you a "non-investor"). I thought $5k was a tad high at first (but now realize it's probably not) and, of course, my realtor thinks it's way high (and he's obviously not the one that gets "stuck" if I'm over budget; I am).
With all that said, I'm in a bit of a rush to get my first deal underway, so I'm planning to submit an offer today of $30,000 with the following contingencies:
1.) Seller (the bank) to pay all title fees, up to $2,500. My lender suggested this in order to keep us below the ceiling for % of allowable fees charged on a particular loan amount.
2.) Inspection contingency. I can walk if I'm unhappy with inspection for any reason. I'm asking for 10 days to obtain home inspection.
3.) Being able to secure the financing.
My realtor thinks "they'll be in no rush to respond," so obviously he must think my offer is quite low (he seemed to think this was a good deal in the low 40Ks!)
I don't want putting this offer in and not knowing where we are to force me to possibly miss other opportunities (funds are limited, so tying these funds up would prevent me from making another offer), so I feel like we should give the bank a certain amount of time to respond. HOW MUCH TIME SHOULD WE GIVE THEM?
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