Hello Everyone, I am new to real estate investing and am looking to purchase my first investment property so any advice you can share is greatly appreciated. I am looking at purchasing a 4/2 house that rents for 800 a month. When I run the numbers it looks like I will be lucky to clear 100 a month cash flow but I'm thinking the property should appreciate in value over the next several years and I can sell and move on to something else. The current tenant has a disability and has government help which means I would receive the rent check from the government every month. The tenant takes very good care of the property and wants to stay on the property and in several years have the option of purchasing the property. Is there any kind of deal or contract I can get on paper with them that would benefit the both of us over the course of the next several years until they are able to purchase the property or do I just go by word of mouth and hope for the best? Thanks in advance for your help!
@James Mast While you can have an Option to Purchase contract where the tenant pays you a fee for the option to purchase as some predetermined price (or according to some pricing schedule), these often don't work out. I wouldn't count on it.
It doesn't sound like the house will cash flow, so you are just speculating on appreciation. Some investors do that. But they know what they are doing and take a calculated risk.
Not a good deal. The tennat will never be able to buy th eproperty and cash flow is likley not worth th einvestment. I would walk away.
Never count on appreciation when you have next to no cash flow. (unless you are in CA)
@Larry T. @Thomas S. Thanks for your advice! I was leaning towards passing on this property anyway but didn't want to pass up a possible opportunity. Your advice just confirmed my decision to pass on this one and keep looking.
I agree with @Thomas S. In addition to that, your thinking on a very small scale in regards to growth (which I am assuming is because you do not have much capital to start) and that needs to be adjusted. What I mean by that is if you have limited capital then try to leverage; whether it be partnering or leveraging credit, etc. There are a variety of ways to grow at a better pace rather than relying on each asset to spur the next.