First buy and hold purchase

8 Replies

I have a 3/1 cape style in Richmond Va that I think may be a good buy.

Asking 65k, but I talked them down to 55k.

Rent in the area, according to CL and rent range is about 775 - 825.  Renter pays gas and electric, I pay water and sewer. 

House is turnkey.  Minimal repair cost needed, if at all.  

House is great, block is OK, but two blocks away is not so nice.  This is my risk.  Can I get a better than horrible renter in a neighborhood that is OK but near a shady area.  

CoC with 25% down, 10% vacancy rate and doing my own PM is 27%. I know you all are going to say that's insanely high and I must be missing something. Even if my rent speculation is wrong, I know I can get $550 (one percent rule). That still gets me a 14% CoC return.

What neighborhood is it in? If you're north of the River or in Forest Hill Park, Manchester, etc. chances are you won't have trouble with young professionals moving in. Richmond is a very unique market when it comes to "troubled" areas. Most of those historic neighborhoods are mid-revitalization and reasonably priced rentals are highly desirable by VCU students/young professional urbanites, etc.

Originally posted by @Adam Stanton:

I have a 3/1 cape style in Richmond Va that I think may be a good buy.

Asking 65k, but I talked them down to 55k.

Rent in the area, according to CL and rent range is about 775 - 825.  Renter pays gas and electric, I pay water and sewer. 

House is turnkey.  Minimal repair cost needed, if at all.  

House is great, block is OK, but two blocks away is not so nice.  This is my risk.  Can I get a better than horrible renter in a neighborhood that is OK but near a shady area.  

CoC with 25% down, 10% vacancy rate and doing my own PM is 27%. I know you all are going to say that's insanely high and I must be missing something. Even if my rent speculation is wrong, I know I can get $550 (one percent rule). That still gets me a 14% CoC return.

Hi Adam,

I think you can find a deal with better numbers than that.

In most of Ohio you can buy complete B class turnkey for between $40,000 - $50,000 with rents of $750 - $850pm.

If you want to do the work yourself the numbers would be even more attractive.

We just bought a 3 bedroom home in a B- area for $8,500 and after renovation will rent for $650pm.

There are many deals out there. Just be patient for the right one to come along.

Thanks and have a great day.

@johndeavers, it is north, off Mechanicsville tpke just south of 64.  It's nearer the tpke than I'd like it to be.  I'm sure you're familiar.  

@engelorumora, those sound like great deals but REI is all about location. What works in your market doesn't necessarily work in mine. However, if you find another 8500 deal let me know. I'll fund it and split it with you :)

Originally posted by @Adam Stanton:

@johndeavers, it is north, off Mechanicsville tpke just south of 64.  It's nearer the tpke than I'd like it to be.  I'm sure you're familiar.  

@engelorumora, those sound like great deals but REI is all about location. What works in your market doesn't necessarily work in mine. However, if you find another 8500 deal let me know. I'll fund it and split it with you :)

 Adam

I would agree. If you're buying for $40,000-$50,000 you're either getting a screaming deal or buying in the hood. 

it's a turn key rental just inside the city limits. I call it a really nice house on a nice block in a just ok neighborhood. It's my first rental so I have a lot to learn. But I'm pretty sure I can make a few bucks off it. 

@Adam Stanton , I know that area very well and we own rentals there. There are a couple of other things to think about like square footage and updates on the home like HVAC, condition of roof, what kind of siding, etc. If there is a any deferred maintence or needed things in the next 5 years that can impact it. 

As far as whether the deal is a good one or not it partly depends on you. The numbers probably work but there are better deals out there to be had. It comes down to how hard you want to look to find a better deal or are you okay with settling with something that is marginal. 

Brian

Sounds like a fair deal if it's near to where you live so you can watch and maintain it.

Does it have good curb appeal? What are other sales in the area like? Is it in a slum or a nice place for people with kids?

There's always stories of great deals that other people have gotten. Rarely can these be duplicated. . I'd take a sure fire base hit over a long shot home run, but that's just me.

@brian rhodes - Sent you a PM.  Agree completely that Richmond has better deals to offer.  As I get better I'll find them.  Just had a baby so time is a bit of a luxury.  This deal, while not screaming hot I think still offers good cash flow.  I structured it so down the road should I want a PM there's enough meat on the deal to allow it.  

@david hood - yes, good curb appeal, low low sales in the area.  I suspect the people who will want to live there will be the ones who know the area, in other words, they know it's got some issues.  My job now as I see it is to get smart on how to screen tenants.  

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