Does this deal make sense?

Question

Hey BP Family there's a deal I'm working on that I want to run by you guys. I don't think it makes sense from a cash flow perspective but wanted to get your view.

Single Family House in the Metro Atlanta Area

$59,000 (They have countered me to $59,000. Was originally $60,000)

Comps in the area range from $65,000 - $70,000

Currently a tenant in the house paying $800 a month

Financed deal at 4.75% - 5.00% with 20.00% equity down

Blue Collar neighborhood.

Does this deal make sense or no? and at what price would it make sense to you?

Thanks for the input!

Chudi

Heather W. · Answer

Pass. You can do better, Chudi.

Ericka Parrott · Answer

I'd pass. Is that owner financing?  If so that does make it an attractive deal but there are still plenty of properties on the market in Stone Mountain for under 59,000 and I'm sure you can also find off-market deals with much better numbers.

Rick Baggenstoss · Answer

@Chukwudi Motanya  I'm not long on Stone Mountain.  There are some nice pockets, but I wouldn't put my money there.  You shouldn't count on appreciation, but you should give yourself a better shot at it.

This same deal I'd do in Tucker, historic Hapeville, or Decatur. (trying to think of places with comparable prices but better outlook).

Joe Villeneuve · Answer

Quick numbers:

800    Rent254    Mortgage  80    PM246   T/I   (guess)220   Cash Flow (without vacancy, CAPEX, etc...figured in)

2640/year   with nothing going wrong (unlikely)

11,800    Down payment (20%)

4.5 years to break even cash wise.

For me, this is a losing deal.

Joe Villeneuve · Answer

Taxes, insurance, property manager, ???...per month.  What is the cost of the 80% you are financing...per month?

Chukwudi Motanya · Answer

@Cal C.

Hey Cal,

There would not be much deferred maintenance. The house has been taken care of very well.

Tenant has been in the house for 2 years. From what seller said (with grain of salt) no problem with payments. Still in prelim diligence stage

House is in Stone Mountain GA

Houses around it are within the $65-$70 range and are in good condition.

Any other details?

Cal C. · Answer

How much deferred maint?

What do you know about the tenant? Length of tenancy, credit scores, job history, etc?

What do you know about the lease?  Have you verified lease details with tenant?

Where is it?

What are the houses around it like?

Does this deal make sense?

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