Minimum Rent

6 Replies

I have a property identified for potential purchase. 

1920 2bed/1bath new roof,  pipes,  water heater. 

Nice wood floors and woodwork throughout. 

Comps support 24-27valuation

Asking 16k

Rented at $550

Taxes $780/yr

Taxes $400/yr(est)

Management $75/month(prop. manager's min.)

 

Distressed sale,  needs "no"  work,  tenant in place. 

Planning on no money down 15yr loan at 6%

This deal passes the standard rules of thumb: 2%, 50%, 70% 

It fits my strategy of not wanting a bunch of debt long-term  (I could pay this off pretty quick)

I have some other(3-4bedroom) houses nearby that stay occupied.  It's not he best neighborhood,  bit it's certainly no war zone. (there is a section of town that houses go for 5k)

What are your thoughts on the deal? I like the house,  but I think sometimes with fixed costs it's hard to make money with lower rents. 

I do long-term buy and holds. 

if houses go for 5k then why pay 16k? 550 also seems low for rent and 75 seems high for management

I  was making the 5k comment as a neighborhood comparison. Houses don't go for 5k in the neighborhood in question. 

550 is about market rate(maybe on the low end) for a 2 bedroom in this area. 

You already out 100 a month on t and i, pluse what you will be paying at 6% over 15, leaving little room for vac/maintenance.  I would worry more about how well it matches what you are looking to do then any of the rules you listed above.  @Jassem A. it all of what you mentions is dependent on location.  He mentioned comps support 24-27k.  Its just the same as in our area- house in North End and Ocean Lakes are going to sell at a lot different price ranges/

I see about a 16% cap property with a cost of money at 6%.  That is great.  Even with no money into the project you should get about $95 per month cash flow.  My only concern would be is this too small a deal to bother with?  If not, take it.

Good Luck.

Bill

Yeah - another buy and holder!  Distressed owner sale, then?  The property doesn't seem distressed.  I have sticker shock.  Here I am lucky to get a single-family for 110x rent (that's why I am a multi-investor, mostly!)  The mgt fee as a % is huge, but I can understand the mgr needing a minimum.  Costs per unit should drop as you grow.  Is this property in your area?  If so, I would manage for myself.  Could someone explain comps support '24-27' valuation?  Thanks!