Updated about 16 years ago on . Most recent reply
Deal on a townhouse
OK, I normally would stay away from this due to HOA fees but still wondering if it's worth it.
TH, 2br/2ba/1gr, decent condition, 40K. HOA $175/mo, taxes $650/yr. Rents for $800/mo.
I would not do the 50/2 calculation since I'll pay cash for it. Go/no go? Can I find better deals for my money?
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#3 Real Estate Deal Analysis & Advice Contributor
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- Mercer Island, WA
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#3 Real Estate Deal Analysis & Advice Contributor
- Rental Property Investor
- Mercer Island, WA
The 50% rule applies whether you're paying cash or financing 100%. It just refers to expenses, not the debt.
If you apply that, you get NOI of $400 a month or $4800 a year. If you're buying at $40K, thats a cash on cash return of 12%. A little low for my liking but you might consider that OK.
Trouble is, seems like all too often, and HOA pushes your expenses above the 50% guideline.