Help newbie - take this deal or leave it?

Question

Hello BP members,

I am a newbie and have found a potential property in Birmingham, AL.  This will be my first if I choose to proceed.

As far as I can tell the numbers look right from my calucations.  Asking price is 33 K. House is presently rented to a section 58 lady so there is  a steady check and she faithfully pays the difference of  $200.  The rent is $700.00.   My issue is that the seller (FSBO) wants to sell quick and changed his mind from financing to cash only offer.  I do have the funds though this was not my original plan.  Looking at other properties this appears to be a great deal.  I also like the fact that there is a section 8 renter whom I have met, keeps property in good condition and has no plans of moving soon.

My question is am I putting too much down for a starter.   My thinking is I can utilize the cash out strategy down the road and move on to other properties without being tied down for using a big chunk of my capital.  Thoughts please? Are there factors I am not considering if I go all cash on this deal?

Katherine T. · Answer

Thanks Dejesus for your thoughts.  You make a great point.  I can use this cash to obtain an additional 2 or 3 properties.   This has been the reason I am hesitant.  Any yes, this deal would take a greater percentage of my reserves  even though I can fairly quickly replenish it via my JOB.  Any experience with cash out transactions?

Skylar Dejesus · Answer

How much capital will you have left over if you use all cash for this deal? Will you have repair funds? Could you possibly increase your cash flow by using the same amount of cash for down payments on 2/3 properties instead of one? I would say if the property passes inspection and their is positioned long time passive income I would go for it only if you had more cash reserves. For me I am always looking to make my next move and acquiring more properties is always easier if I don't have to go back to square one after every purchase.