Account Closed
Investor · Mount Pleasant, SC · Member since 2015 · 43 posts · 21 votes
11y
Only $30/month for management?
0 Reply
Tom Webber
Real Estate Broker · North Liberty, IA · Member since 2014 · 42 posts · 22 votes
11y
Based on the numbers alone I would say that looks pretty good. IT all depends on the location, condition of the property for me so I would say not knowing those factors the numbers look pretty good even though you are buying it at retail cost. The ARV is the same as purchase price.
I would hope that it is in retail condition and you are buying to hold for the equity and cash flow. If that is the case I would say the numbers look good. You management number seems low unless you are self managing it and that is what you figure per month in odds and ends.
Hope that helps
0 Reply
Robert Bartman
OP
Houston, TX · Member since 2015 · 17 posts · 4 votes
11y
Hi Carol and Tom, Thanks so much for your comments. Tom, I will be managing the property so that is why the dollar amount is small. But thanks for asking! The property is turnkey so no rehab is necessary. Yes, I plan on holding the property for cash flow. Again, thanks for your comments and I appreciate the both of you for taking time to comment.
0 Reply
Doug McLeodPro Member
Investor · Cypress, TX · Member since 2014 · 496 posts · 205 votes
11y
@Robert Bartman
This might not a bad deal, but it would be nice to pick up at least a little equity and there are a couple of things that seems "off" for most submarkets around Houston. Do you have solid comps for the ARV and Rents? 1.9% rent/price ratio is VERY unusual in any area around Houston I've seen, but the lowest ARVs I've dealt with are around 95k. Ratios are typically more in the 1.1-1.3 range.
And where in the world are you getting 3.5% on a non-owner-occupied property? Did you buy that down with the 3 points? Even then, that's a heck of a rate.
0 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
11y
I would pass. There is no profit made by purchasing the property.
0 Reply
Jimmy H.
Investor · Houston, TX · Member since 2015 · 51 posts · 11 votes
11y
You sure you can get $1,500 rent on a property with ARV of 79K? Is there already current tenants and decent expectations that you get $1,500 in rent?
0 Reply
Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
11y
@Robert Bartman Because you seem to be boasting about this deal, methinks @John Thedford is being deliberately provocative?...
0 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
11y
Originally posted by @Brent Coombs:

@Robert Bartman Because you seem to be boasting about this deal, methinks @John Thedford is being deliberately provocative?...
Purchase price including rehab is 81K? ARV is 79? Where is the profit?
0 Reply
Manny Rodriguez
Real Estate Investor · Florissant, MO · Member since 2014 · 53 posts · 23 votes
11y
Thank you for sharing!
Is the equity come in because you are making a cash down payment?
Manny
0 Reply
Jesse T.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
11y
Are you required to pay utilities? Of course you couldn't get as much rent - but with them being a relatively high percentage of rent you may do better net if the tenant is paying the utilities directly.
Others mentioned your management fee looks low. Even if you are doing it yourself, it is your work(rather than your investment) that is earning that portion of the profits. On the other hand the insurance looks high for the property value. It could be correct, it just doesn't look typical.
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
11y
Let's put the numbers aside. What kind of neighborhood is this?
0 Reply
Aaron Carter
Real Estate Agent · Bemidji, MN · Member since 2014 · 59 posts · 11 votes
11y
Originally posted by @John Thedford:

Originally posted by @Brent Coombs:
@Robert Bartman Because you seem to be boasting about this deal, methinks @John Thedford is being deliberately provocative?...
Purchase price including rehab is 81K? ARV is 79? Where is the profit?
I am assuming this is for a buy and hold not a flip... Am I missing something?
2 Reply
Fred Heller
Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
11y
I may be missing something but your water/sewerage/trash costs seem awfully high. Those are all included in the water bill, and mine only runs between $20 and $25 per month.
Personally I would have the tenant cover those for a single family home.
I will be happy to run some rental comps in the area if you'll PM me the address.
0 Reply
Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
11y
Originally posted by @John Thedford:

Originally posted by @Brent Coombs:
@Robert Bartman Because you seem to be boasting about this deal, methinks @John Thedford is being deliberately provocative?...
Purchase price including rehab is 81K? ARV is 79? Where is the profit?
Aah, I had really only read the responses (about rent return / purchase price), rather than noticing that he was considering paying full retail. Nevertheless, sometimes paying full price CAN be profitable (but I agree, not for quick flipping)! Robert, in order to be able to hedge your bets, yes, try to get it for significantly less than ARV - R! Else, please make sure those good ROI calculations are totally realistic. All the best...
0 Reply
James DeRoest
Investor · Century, FL · Member since 2015 · 950 posts · 603 votes
11y
Originally posted by @Robert Bartman:

Would you invest in this property? Why or Why Not!
Umm, why are you including "electricity" as a paid for utility?
Let me assure you, if you pay the leccy for a tenant, it's not going to cost you $150 a month. The tenant will be running the house like an icebox in the summer and an oven in the winter, and they'll run so many lights that you'll see your house from space.
Think more like $300-400pm if you give away electricity for free. Make them pay for it. Least they can do.
1 Reply
James DeRoest
Investor · Century, FL · Member since 2015 · 950 posts · 603 votes
11y
Originally posted by @Robert Bartman:

Would you invest in this property? Why or Why Not!
As a buy and hold investor, the thing that this deal isn't showing is your exit strategy. The numbers obviously don't show that.
This is a totally personal opinion - who is winning in this deal?
I have trouble thinking you are because $300pm is a rounding error. That's not really profit, it's kinda like a bonus for turning up and playing the game, a free chip at a casino.
The bank isn't really winning because interest rates are so low, and frankly, they are getting paid so little each month it's hardly the jackpot for them either.
You are servicing that debt for 30 years. Put this in perspective, you'll be celebrating your grandchildrens birthdays before this is paid off.
The tenant isn't really building you any equity - cause it's taking 30 years to pay off. And your initial $18k is pretty much stagnant as well.
So no one seems to be winning, and that's what needs to change to make this a good deal. You need to make the deal a winner.
For instance, the 30 year thing, you probably are saying to yourself "i'll pay it off quicker", but how much quicker? I hate debt personally. We've never really got along. I find it a bit of a drag - much like my first wife. I'd be looking at a plan to get this thing paid off in 5-6 years. Could you throw all the profits into the mortgage early for instance? Can you add $100 a month to the mortgage out of your pocket (assuming you have an outside job) - can you add $300 a month to the mortgage?
Your power comes from getting this paid off quickly.
Otherwise, you're on a 30 year drag of shuffling money around. What you've described above is a good start, but it'll be a chore after the first few years. You need a planned exit from the debt before you've gone grey.
0 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
11y
Originally posted by @Brent Coombs:

Originally posted by @John Thedford:
Originally posted by @Brent Coombs:

@Robert Bartman Because you seem to be boasting about this deal, methinks @John Thedford is being deliberately provocative?...
Purchase price including rehab is 81K? ARV is 79? Where is the profit?
Aah, I had really only read the responses (about rent return / purchase price), rather than noticing that he was considering paying full retail. Nevertheless, sometimes paying full price CAN be profitable (but I agree, not for quick flipping)! Robert, in order to be able to hedge your bets, yes, try to get it for significantly less than ARV - R! Else, please make sure those good ROI calculations are totally realistic. All the best...
Hey Brent: I like you and enjoy your posts! The OP asked "would you buy this deal"? My answer is NO! As many times as I have stated it, the #1 rule in "the millionaire real estate investor" by Kellar is: buy below market! You make money when you buy. I would encourage anyone to pass on a deal if there wasn't profit in it from day one. All the assumptions about cash flow, etc are fine BUT....when the market changes---and IT WILL---that may well leave the buyer upside down. This doesnt take into account that he will have to own and manage the property just to recover money to get back to market value. I love to see people make deals and make money! This one does not make sense to me. Others may see it differently and that is fine..but for me, without making a good profit walking in the door, it does not work. I would rather wait and buy one or two good deals than be in a hurry and buy a marginal deal that could lose money.
2 Reply
Millie D.
Davidson, NC · Member since 2015 · 34 posts · 6 votes
11y
I agree with @Jesse T., what first jumps out from those numbers are:
- the insurance, which seems too high
- utilities--why would the landlord pay utilities on a SFH? or is this a duplex?
- closing costs--$3K is a lot (too much) on such a small financed amount
That being said, what really jumps out is the rent! Subtracting for utilities and adjusting the insurance number, you're getting nearly $1300 a month on a house worth 79K completely rehabbed? Where is this? If I ran into such a deal in the area I'm in, I'd jump on it!
0 Reply
Kevin Wood
Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
11y
Originally posted by @Robert Bartman:

Hi Carol and Tom, Thanks so much for your comments. Tom, I will be managing the property so that is why the dollar amount is small. But thanks for asking! The property is turnkey so no rehab is necessary. Yes, I plan on holding the property for cash flow. Again, thanks for your comments and I appreciate the both of you for taking time to comment.
We factor in at least 8% for mgmt even if we are self managing. Just because you decide to self manage you need to consider that as a cost. I know Brandon of BP fame does 11%.
1 Reply
Tyron McDaniel
Flipper/Rehabber · Sugar Land, TX · Member since 2015 · 142 posts · 64 votes
11y
I wouldn't do the ESPECIALLY because you live in Houston! Although I like the potential rental amount, I am not sure that number will prove true to form with the type of property you are buying with this type of ARV. Secondly if you are going to come to closing with $18k there are ALOT better overall deals to be had in Houston that offer both monthly free cash flow AND equity capture the day of purchase!
YES, appreciation for the next few years looks good for Houston but you can't pay any of your current bills with future appreciation!

PASS on the deal and find a better place for your capital!
1 Reply
Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
11y
What state/city is a TK company selling a home for $79,900 with rents in the $1,500 area? I would assume this is a duplex or triplex then as I dont know of any market with figures like that. Also where are you getting a 3.50% rate when on average conventional lenders are around the 4.875% rate for investment properties?
Seems too good to be true.
Curt Davis - KAIZEN Realty538 Reviews
Website View Page
1 Reply
Hal Thompson
Las Vegas, NV · Member since 2014 · 284 posts · 123 votes
11y
The cash flow seems decent for an $80k property. It is concerning that the ARV of the property is below your cost. Generally you want to stay away from such properties. Do you have an investment theory that this will be worth substantially more than the ARV soon (ie they're building Whole Foods across the street, etc?).
Also, if your maintenance costs are off, these kinds of properties can get upside down in a hurry.
0 Reply
Chris Wierman
Mutual Fund Compliance Specialist · Denver, CO · Member since 2015 · 27 posts · 6 votes
11y
I am still new to BP, but here are my thoughts:
-You mentioned that this is a turn-key property, are you saying that you are purchasing this from someone else as an investment property? If so, are these there numbers or yours? If theirs, take with a huge grain of salt and probably re-run them completely with a fresh set of assumptions.
-I agree with a few others where the insurance/water/sewer seems high (and odd for a LL to pay for), and management seems low. I might tweak these in your estimates. I would also caution against undervaluing the management fees because although you are happy to manage it now, you might not be in the future. You might regret putting yourself into a situation where you HAVE to manage it yourself otherwise it won't cash flow (and robbing you of a chance to be truly hands off, sitting on a beach somewhere).
1 Reply
David Nolan
Professional Property Investor · Brisbane, Queensland · Member since 2015 · 165 posts · 160 votes
11y
@Robert Bartman Hi Robert, might I start by asking what is your objective with this property? In other words what do you want to get out of it? You make money in real estate when you buy so it would be best if you could identify exactly what your gain will be for doing this deal with due consideration to the risk involved, the IRR, the time commitment on your part, the potential for a down turn in the market and what you believe the market growth will look like over the next cycle or two. In other words, as a famous actor once said, "show me the money".
Simply buying to hold for ever and a day is a dangerous game to play because markets move up and down and you can be richer, on paper, one day and poorer, on paper, the next. Cash is king so at some point in time you would be wise to turn your profits into cash ready to reuse in another profit making deal.
These are some of the basic things needed in analysing a deal to determine if it is worth the effort, risk and time involved.
Happy investing!
0 Reply
Ed L.
Residential Real Estate Agent · Hattiesburg, MS · Member since 2011 · 475 posts · 141 votes
11y
Looks like a fair deal where the landlord is carrying more than the fair share of expenses to justify above market rent.
I would probably drop the rent a little and let the tenant pay their own utilities. Should be a wash but at least it limits your exposure to a abusive tenant.
I am miring your pie chart!
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