Hi every one i have been on the site for a while now but just as a reader. I have found a property in my area that my wife and i want to pick up.
Here are the stats
Owner financed note of $170000 at 6% for 30yr
Closing cost of 5500 that i am paying out of pocket
The home needs some work of around to a tune of 12k-15k
The house has a ARV of around 250k-265k
Taxes are 4550 a year
Insurance is 1350 a year
I believe i can get rent rates at 2000 but for worst case i have been using 1800 for all my calculations
I ran the investment calculator and before i refinance the home it say i cashflow 290 a month and after a refinance i believe my cashflow to be around 350. This is with no vacancy rate and nothing withheld for repairs.
My question is this is 350 a month a good return for a house like this in dallas?
You can get $350/mo on a much cheaper house if you use the same "no vacancy, no repairs" assumption. It is really a function of rent vs PITI if nothing else is factored in.
With and ARV to cost like that you might be better flipping it. Looking at a 50-60k payday.
And I would be sure to include any expenses you can think of on the house in your monthly rent calcs. I'm pretty new here, but from what I've read its better to be conservative and only think you're going to make $100 and then find out you will make $300 then for the reverse to be true. Also assume your repair costs are going to be higher than expected. But it looks like a pretty good deal any ways.
Best of Luck!
Not including vacancy or repairs for a rental is not reality IMO. These things will happen. I think you should also include PM/Leasing Fees even if you are going to self manage (in case you have to hire out PM in the future).
I have an SFR that rents for $1500 a month. My past few tenants have stayed on average 2 years then they all bought their own home. Someone paying $1800 -$2000 a amount (in Texas) has a higher probability of purchasing their own home in the near future versus being a long term tenant IMO (vacancy, make ready, and repairs are killers of cash flow).
@David Harrel What is your end goal? You could get better cash flow with lower valued properties. Depending on the neighborhood and schools, this could net you decent appreciation if you are holding for retirement and just want the tenant to pay the bills in the meantime.
Also I agree with others in this thread that you need to be accounting for vacancy and repairs.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!