Looking at a SFR deal as a result from direct mail marketing but I am waffling on the 'What Ifs'. This is a 3/2 in my local area that can rent between $1100-$1200/month. The owner (retired broker) owns it free and clear and will sell for $75K. It will need about $3K in general flooring, paint and fixtures to put in a new tenant.
This is basically a no money down deal where I can purchase with my LOC and then refinance at a LTV of 75%. Would need an appraisal of $104K. The rehabbed comps in this neighborhood are selling for $110K.
My area of concern with this house is that it will probably need the polybutylene plumbing replaced soon ($8K expense) and eventually the pressboard siding ($9K expense). If any of these came up in the next two years I would have to pay for out of my personal pocket and would substantially stymie the development of my RE investing. However, looking at a monthly cash flow potential of over $300 is very enticing.
Can anyone help me on the risk vs the reward in this scenario or show me an option I may be overlooking?
If it needs $17000 in work thats 15 months of rent why cant you try to work on[price with these factors Did you run a spreadsheet or use the Bp calculator to see exactly where you are , adding in your capex expenses. That is why you have cold feet
Can you get anything from the class action settlement fund for PB pipes? Is this house on a slab or does it have a basement or crawl space? $8k to replumb the water lines is pretty steep unless it's on a slab.
Thanks for the responses
@Steven Picker I ran the calculations on a spreadsheet and accounted for PITI plus Maint, Vac & Cap Ex each in the amount of 1 months mortgage; plus Maint in the amount of 1 months rent payment. Does that sound accurate to you?
@Todd Plambeck The home is on a slab which accounts for the higher cost. I don't think they are still paying out on the PB class action suit are they?
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