Need advice on single family deal analysis
Hi BP Community,
I am looking at a potential single family investment property that seems interesting but returns seem low with conventional financing (15% down for single family investment property) and wanted to get your thoughts on it as an investment deal:
Asking price 149K
Market Value - @ 190K
Taxes are $3,200 / year
Water/sewer - $600/year
It's currently rented at $1,600 / month
Tenants pay Electricity / gas
It could use some tlc inside - update kitchen cabinets, replace a few older windows - maybe @ 10K but as it stands the tenants seem happy enough with it and the rental income seems typical for that area so making the improvements to the kitchen would not bring in more rent perse. Here is the BP Rental Calculator report, would love to get your thoughts. The area has slow appreciation but there is some equity going into the deal. But cash flow of $46.45 and cap rate of 4.84% and cash on cash return of 1.45% doesn't seem great.
https://www.biggerpockets.com/calculators/shared/7136/e4c99347-cdaf-4fbf-9452-88b86b980aa4
Thank you for any input.
At first glance, the numbers don't look good, but first you have to consider what your goal for this property is. What are you trying to accomplish?
The cash flow looks pretty meager, but is there any room to raise rents?
Are you really going to pay someone to manage the property?
There is no hard and fast answer. I believe many on BP would pass this one up. I would based on the numbers you have, but what works for one investor doesn't work for another. I think you should set some criteria for what you want your investments to produce and incorporate those criteria with your REI goals in general.
That should help you decide whether or not something is a good investment.
Ed
@Edmund Ricker, thank you for the input.
The plan for the property is to buy and hold for long term, we would like to see a greater cap rate and cash flow but I think with this particular property the appreciation / rentals may grow at a very slow rate. I'm curious and maybe this is a question for a bank as it already has some equity in there, if we were to purchase it, could we look to refi after a year and pull out some of the down payment, that way we would be controlling a property with less of our own money and would have a greater cap rate.
