Thoughts on this deal - Is my rent too high?

Question

My analysis

House: 3 bed/2.5 bath

Asking price: $359k

Proposed offer price: $310-330k

ARV: $359k (assuming that there is no change in value to be on the safe side)

Rent total: $3400

• (2 bedrooms (9’x15'): $1100 x2; shared bathroom)
• (1 bedroom (12’x10’): $1200; private bathroom and walk-in closet 7’x8’)
• Utilities split between roommates, except garbage

Closing cost: 9k (includes $6k for paying PMI upfront)

Repairs: $2k (minor touches; seems to be in fairly good condition)

Down payment: 3.5%

Loan rate: 4%

P&I: $1428 - 1520/mo

Taxes: $334/mo

Insurance: $150/mo

Garbage: $45/mo

Vacancy: 8.5%

Repairs: 7%

CapEx: 10%

Property Management: 10%

Annual Income Growth: 2%

Annual PV Growth: 2%

Annual Expenses growth: 2%

Sales Expense: 10%

Cash flow: $143 - 235/mo

Cash on cash: 7.64 - 12.95%

Is my price for the rent too optimistic? Renting the entire house would be less (say $2000-2400). But, I feel the size of the rooms justify  the rent along with the W/D in the basement and the house is in a  good location  (Alexandria C+/B- area).

I would be living in the house first with 2 roommates and  then fully renting out the 3 bedrooms later. The rent does not include the  basement that also has a half bath (maybe I could live in the basement and rent out all 3 bedrooms).

Thomas S. · Answer

Pass, it is over priced based on a rent of $2400 and you will never get the $3400 you are dreaming of.

Based your numbers on what you know not what you want.

Dan Bernstein · Answer

@Julius Fitzhugh...unless you are buying directly from the owner off market, there is no real benefit to work without representation from an agent/broker for an on market property.  I would recommend finding an agent/broker that is a good fit and used to working with investors.  If you are buying an on market property, the commission is offered by the listing agent.  Typically, if you work directly with the listing agent, they will get both sides of the commission.   In a dual agency situation, the listing agent can't legally advise you and they will always be more concerned with the owner's interests because of future business and referrals from their client.

Julius F. · Answer

@Thomas S. , @Dan Bernstein , @Matthew Paul

Thanks everyone for the feedback and tips. I thought my numbers were high I guess I was hoping. I'll work on finding rental comps for rooms.

Is there a way to check prices for rent? I use a combination of Craigslist and Rentometer. Is there any other methods people would suggest for finding rents?

Matthew Paul · Answer

The numbers for roomates is HIGH especially if you want them to split the utilities .

Your utility costs dont change that much with the extra people .

You need to check what prices are in your area first for rooms

Dan Bernstein · Answer

@Julius Fitzhugh your management fee should be 8%.  Its hard to give you advice on rental comps without knowing the specific neighborhood and condition.  I actually happen to live 2 miles south of the Huntington metro and your numbers seem high for rent unless the condition of the home is very good.

Dan Bernstein · Answer

@Julius Fitzhugh, your agent should be able to answer all of your questions, especially the estimated rental rates.  Take a look at the rental comps and Good Luck!

Julius F. · Answer

@Dan Bernstein I am working with an agent and if I was not I would go get licensed myself. But it is good to know who has my best interests in mind. As I gain a little experience, I am starting to realize what is important for deals and the people I work with to make those deals happen. Thanks.

Julius F. · Answer

@Dan Bernstein

The house was 2212 Sweetbriar dr. The house seems in good condition, but that is only based on the pictures.

Julius F. · Answer

@Chris Seveney

The locations is south of 495 (about 2.2 miles south of Huntington metro station). It is not on the metro, but relatively close. But as you stated I was being pretty optimistic.

My thoughts were the house is in a location close enough to public transportation (metro/bus) and the rooms seem a bit bigger than places that I have looked at. After doing a little more research though,  the rent is more in the $600-800 in better locations as you stated.

No, I am not sure I can get the house for $40k below the asking price. However, I was under the impression that you don't know unless you ask.

Thoughts on this deal - Is my rent too high?

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