Houston, TX · Member since 2017 · 40 posts · 6 votes
Hi everyone, I'm still new to real estate investing so any help from those more experienced than me would be much appreciated. I'm interested in focusing on A type SFHs with higher end tenants with homes in the 150-250 range. I came across this and am considering putting an offer. Is this still a good deal despite its higher price or should I walk away? Thanks!
Location: 13 year old SFH 2000 sqft in great solid neighborhood in great location. Only 1 owner, which is the current one and owner occupied, never been rented out.
Cost: 265,000 with 20% down
Rental income: 2000-2200 per month based on market
Property tax: 250/month
Insurance: 80/month
HOA: 29/month
Assuming 2050 rental per month, 5% vacancy and 5% maintenance per month set aside for expenses, and 4.1% interest rate (got this in December 2016), I would cash flow at 466 per month with a cash on cash of 10.5%.
Houston, TX · Member since 2017 · 40 posts · 6 votes
9y
Regarding capex, I'm not sure. The house is only 13 years old, roof is 7 years old. Everything is in great condition lookwise as it has only had 1 owner and it was owner occupied.
Lender · New York City, NY · Member since 2017 · 194 posts · 56 votes
9y
Consider calculating in a higher vacancy percentage. Often times people forget to place enough weight on the holding cost of an SFR property sitting vacant for a period of time. When they don't, some landlords end up panicking a bit and renting at a lower rate or taking in a so-so renter, just to fill the space. As you gain more properties (and/or units), absorbing the cost of a property sitting vacant can be spread across multiple rentals. However, if this is your first property, you want to make sure you have reserves to withstand a reasonable amount of time a property sits vacant. Hopefully, you get a great tenant that pays on time and, maintains your property and stays at the property for a long period of time...but regardless, it's better to prepare for alternative scenarios.
Rental Property Investor · Concord, CA · Member since 2016 · 499 posts · 219 votes
9y
Karen Wang capex doesn't need to happen right now. You set aside money for when it's needed. For roof, when it's time to replace, you will have money in your capex account otherwise you will have to come out of pocket for that. This is a legit expense and do account for it in your calculations
Investor · Delray Beach, FL · Member since 2017 · 48 posts · 41 votes
9y
@Karen W. underwriting a 10% vacancy is pretty common. The deal doesn't pass the 1% rule but if the great neighborhood/great location is truly the case you can see appreciation on the deal. Tough call to make ...