Does this sound too good to be true?

Question

So i am new to this RE thing but i feel like this deal seems a little fishy, it just seems too good to be true. I found a deal in charlotte, NC for a MF duplex rental property for 129k asking price, for sale by owner. The seller says that he has tenants in place currently and he cashflows 1300 a month from the property....my question is why would you want to sell a property like that? He said he rehabbed the entire property, so my guess is maybe he bought for very cheap and now wants to make a significant profit on a flip, but i dont know, it just seems too good to be true to me?

Account Closed · Answer

You need WAY more information. Get the expenses figured out first. Also, make sure it is in a good rentable neighborhood.

Jack Knochel · Answer

I would ask him what his definition of cash flow is so you know what your looking at.  But it does sound possible.

Paul S. · Answer

I agree the $1300 sounds a lot like gross rent not cash flow. Do your research on rents in the area and also calculate your own specific expenses (principal + interest + taxes + insurance + management fees since you are in Florida). It really doesn't matter what he makes but rather what you would make given your own purchase/financing/management strategy.

Engelo Rumora · Answer

Hi Carlos,

There are much better deals out there with similar cashflow for a much lower entry price.

Look at some opportunities in the Midwest.

Thanks and have a great day.

Account Closed · Answer

What's seems too good to be true?  People cash out of cash flowing rentals everyday.  He may have a better use for the equity.  Cash flow is great, but sometimes people need access to the equity.  His cash flow is irrelevant to your due diligence.  The actual rents and leases and expenses are what matters.

Andrew S. · Answer

It's amazing what some people's definition of cash flow is.  Yes, this could be completely bogus.  But it could also be that he takes in 1300 a month in rent and he calls that cash flow.  Maybe he owns the property outright (and doesn't count the value of his money). ignores taxes, insurance, etc.

I certainly haven't seen any properties with a verified and consistent cash flow (by MY definition of cash flow) of $1300 a month, sell for 129K.

Ask for a LOT of detail!