Washington, D.C. · Member since 2015 · 3 posts · 0 votes
Hello BP community!
I'm stuck in a dilemma trying to decide if this is a good deal or not, and should I go through with the purchase.
I came across a property that is for sale for 50K, the city has it accessed at $46,500 and after a few counter offers back and forth we're currently at $45,500. The house currently has a tenant in there now and the rent will be $550 a month. Do you guys think this a good deal?
Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
10y
Sidney, it would be harder to tell just on the price and rent.. The more info you have, the better analysis you can do. For example, just for starters...look at a few forums where people have analyzed buy and hold deals to see the process. You could start by running the mortgage calculator in the tools bar (add your local taxes and insurance, maybe call your assessor or look up your mill rate online; call a local agent for a quote or just for a rough estimate).. Then also look at the rental property calculator and all the factors to figure in (vacancy, say 5-10 percent; repairs, reserves for capital items, management at 10 percent, etc)...... That 550 in rent, I am guessing, gets dissolved away quickly with the mortgage, insurance, taxes, and allocations for these other items, diminishing your returns..Also, see if that is market rent or if similar units in the area may go for a bit more (or less).. And think about your goals and strategy (to buy and hold or maybe fix up to increase rents or flip if it is a ugly duckling etc).. Get figures and run some numbers and maybe refine your strategy and see if you still want to do the deal......
Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
10y
Sidney, it would be harder to tell just on the price and rent.. The more info you have, the better analysis you can do. For example, just for starters...look at a few forums where people have analyzed buy and hold deals to see the process. You could start by running the mortgage calculator in the tools bar (add your local taxes and insurance, maybe call your assessor or look up your mill rate online; call a local agent for a quote or just for a rough estimate).. Then also look at the rental property calculator and all the factors to figure in (vacancy, say 5-10 percent; repairs, reserves for capital items, management at 10 percent, etc)...... That 550 in rent, I am guessing, gets dissolved away quickly with the mortgage, insurance, taxes, and allocations for these other items, diminishing your returns..Also, see if that is market rent or if similar units in the area may go for a bit more (or less).. And think about your goals and strategy (to buy and hold or maybe fix up to increase rents or flip if it is a ugly duckling etc).. Get figures and run some numbers and maybe refine your strategy and see if you still want to do the deal......
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
@Sidney Johnson, my main concern is that you are just buying it at market value (or even above). In other words, it's not a bargain. What benefit has all the back and forth given you?
If you had to go to all that effort just to get the Seller to agree to $45.5k instead of $50k, then please know that you have fallen into a trap set by the Agent and/or the Seller. The $50k list price was NEVER expected to fly (but they withhold that)!
These are often the sort of properties that are marketed to out-of-towners who can hardly believe that anyone could buy a property for that sort of price (but please say that YOU know different, right?)...
I would be interested to know if you HAVE done the sort of analysis that @Michael Boyer suggested, and if you could share the results here?
The only reason I would ever recommend paying market value for property is if a HOT appreciating market was calculated to hit that precise area within the very near future. And even then, I would still TRY to find bargain prices.
To put your question into perspective, there are THOUSANDS of properties out there that will rent out for $550k/m which can be bought for less than $30k (plenty of threads about that)!
In summary, from what you have told us, there is no way that we can DEFINITIVELY say that it's a bad deal. But that's my guess. All the best...
Investor · Suffield, CT · Member since 2012 · 94 posts · 25 votes
10y
Hi, check out the cash flow bud. 550 right? -taxes, - insurance, -mortgage (unless you a are paying cash), - vacancy rate, -money saved to repair future damages = cash flow, how much of that will you have left. The other thig is that you actually can do a market analysis and find out how much the property is actually worth. If it is more than the price you're buying it for great you got equity, if the rent is priced under great you can raise the rent (more cash flow). These are the basic things you need to know and please do use the property calculator it will give a better idea o the deasl, good luck.