I finally think I am ready to buy my first rental property. I just need to know what everyone thinks. The house I am looking at is 125K, but needs paint, carpet, AC, and foundation. The total for repairs is about 11K. I can get a loan for 136k with 15% down @ 6%. After repairs the property would appraise for $160k and I would rent for $1400. I just need some advice, and motivation to do this deal if it is a good one.
Hi @Brendan Flannery ,
I used to work for a Turnkey company and ran these kinds of calculations all day long. If you send me a Connection request, I'll send you my Calculator. I'll do the same for anyone who does the same, too.
After running your numbers through, they look quite good; 7.7% ROI if you went all cash, 9.9% ROI if get a loan, and a 21% ROI if you refinance after hitting the $160k ROI. That is one good looking deal.
My friend, it's time to pull the trigger. Your patience has paid off. This one is a winner.
Share the before/after pics so we can celebrate your success!
I don't know what kind of foundation issue this property supposedly has but $11,000 for a foundation issue, AC, paint, and carpet seems extremely low. Depending on the issue a foundation repair could cost 11k or more by itself. If this were in my area I'd evaluate 5k for AC (assuming you need zero duct work) and 3k for paint and 3k for carpet plus 3-5k for unexpected/ minor repairs.
If your numbers are correct, I'd do it. But the only thing I'd question is the foundation repair...that can be a wild card. The rest is easy.
Homes with cracked and/or repaired slabs in Texas are stigmatized. Meaning it won't be able to capture the full ARV of the comps without similar issues. It doesn't matter that the repairs come with a lifetime warranty. These homes are a specific target we look at for cash flow because they can be purchased at a DEEP discount. I'm not sure that your deal is discounted enough for the issue. Use it as a negotiating tool and get a better deal. Try to pull comps on just broken slab homes and see what the numbers say.
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