Good Buy?

Question

1971 home 3 bed 1.5 bath 1046SF

Would this be a good rental?

Purchase price $44,000 (asking price is $44,900 however another investor bought this property in April 2009 for $40,120)
so I don't "think" he would come down much as the original asking price was $49,900, so I am "thinking" he really needs to sell?

April 2009 Appraised value of $60,000

Approx $1,000 in repairs/appliances.

I would finance it for 15 years with 20% down payment
Monthly Rent= $600

Like always- Any and All advice will be greatly appreciated.
Thank you!

Jon Klaus · Answer

Jason, Is this in OK?  What city?  You should be able to find homes in many areas of OK that will rent monthly for 2% of their purchase price.

Jason S · Answer

Eddie,

Thanks for your reply.
The house is in great shape actually built in 1971. 
It was a foreclosure and an investor bought it at foreclosure auction.
I am going off appraisal done for the foreclosure auction which I believe it would be just a drive-by appraisal not a full blown appraisal.

Jason S · Answer

Jon,

Yes it is in Oklahoma City. I may be able to get closer to $700 for this neighborhood but $900 is really doubtful, at least based on rents in the immediate area.  I appreciate your input.

However, I am new to this so I am just comparing to neighborhood rentals..

Eddie Ziv · Answer

I can give you only a formulated answer since I don't know the condition and the age of the house, nor the niebourhood's desirability.
Based on the 2% formula if you buy the house for $44,000, you need at least $880 in rent, but I would treat that formula with a grain of salt. SFRs are tough because unlike multi-family, you are not only competing with other investors, but also with retail buyers. 
If you think you can get $700 a month, I would feel more comfortable. 
Also, if the house doesn't need any improvement, something is wrong with the appraisal. This is too much of the stretch considering the fact that the owner needed to lower the price at the height of the market (April - August). That tells me that the house doesn't worth that much.
By the way, consider finance for 30 years. It will reduce your monthly costs and if you add another lump sum to the principle, you are doing the same thing as 15 years with a greater flexibility.