Hello all please help. I have 2 townhouses and fairly new to investing I have been offered a off marker deal of 1 3/1.5, 1 4/2 and 5 1/1. Have a few thousand deferred maintained on each unit. 4 long term HUD tenants others are leases to students. Total rent 3900. C area. Near colleges. They said 235k but seem motivated Thinking of offering 165k. Repairs would bring to 1850-190. Have seen their llc tax paperwork for 2 yrs. 50 percent rule is spot on. Am I offering too much?
If you were to finance the 165k your mortgage would be around 1300? 1400? To me this is a deal. Get accurate tenant history. IF they will accept your 165k take it. Also what are the values of the homes? if all else fails your could wholesale your deal and still profit. Either way you still profit.
In my mind only two things determine whether this is a good deal or not. Number 1, does it give you the return you want for the level of risk involved? Number 2, it the return equal or greater than the returns you can get in that area on other properties? Using your 50% rule I get about 12%.
I find that with lower rent properties my expense ratio can go above 50% when I include management, maintenance and capital reserves. Make sure that you have a handle on them.
thanks and sorry for the delay. This deal feel thru. They had a higher offer than I wanted to go. To me this was a win in I have learned not to go higher than I felt comfortable with.
Sometimes you just have to walk away.
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