Longview, TX · Member since 2017 · 26 posts · 17 votes
I am in the process of negotiating my first residential rental property right now.
A little info:
Asking price- $41,900
Our first offer-
$24,000(house needs $15,000 in repairs, all cosmetic, nothing structural) we cover closing cost, 10 day option period/ $100, title policy and survey at sellers expense.
Sellers counter- $32,500, but accepted all other terms.
Buyer(me) counter- $28,000, this is where I will bring up the needed repairs to the property. If seller refuses or doesn’t come down to at least thirty I will tell them my offer is good for 4 days and wait to hear from sellers agent.
Any suggestions, tips, advice, etc....?
Rental Property Investor · Brattleboro, VT · Member since 2015 · 204 posts · 174 votes
8y
Based on your numbers the "70% rule of thumb" would come to an offer of 27k, but that is just a guideline. When you bring up the needed repairs I wouldn't be surprised to here something along the lines of "I know it needs 15k in repairs, that's why we are selling you a 60k house for 32k." Do you have a specific $ amount of profit you are looking to make on the deal?
Rental Property Investor · Brattleboro, VT · Member since 2015 · 204 posts · 174 votes
8y
I misread your original post, I was thinking you were flipping it. When I am analyzing rentals I figure out my Max offer based on what I want to end up with for monthly cash flow then I work back words. So if an offer of $30k would get me my desired cashflow of $250 after all expenses (including saving for cap ex property management and maintenance) then I would start with an offer somewhere below that 30k mark and if the seller comes in higher you move on. I like to have a concrete max offer and cash flow worked out before offering, it takes the emotion out of it.
Investor · Houston, TX · Member since 2016 · 54 posts · 25 votes
8y
If you are looking to scale quickly - even tho this is your first deal - having 80% in the deal is never a bad thing - have your guidelines but sometimes you can’t always get it exactly where you want. If you get this one at 80 and the next one at 70 they wash each other out and your right at your 75 if that was your target market. I have some deals that were 82-85% and some that are 50% - but my portfolio balances itself out and still sits under where I’m comfortable. Good luck! The first one is always exciting - sometimes you just have to take the plunge too even if it’s not a steal. Gets you in the game and learning the systems. Better deals will come with time naturally.
Longview, TX · Member since 2017 · 26 posts · 17 votes
8y
I countered back with 28, now playing the waiting game.
After all expenses(Tax, Insurance, Bank note) I’m looking at $484 being the break even.
Looking to loan out $54,000 to cover buying the house, paying for the update and getting a little cash in my pocket to put towards another rent house on the same street.
This exact house was previously rented out for $650. This is a fair rent in the area. If my offer is accepted we will do the rehab and market the house for rent starting at $750, no smoking, no pets( if renter insist on having a dog I will add $25 on top of base rent and a non-refundable pet deposit of $250)tenant pays all utilities and does yard maintenance.
So, as of now I’m projected to net at $266.
Longview, TX · Member since 2017 · 26 posts · 17 votes
8y
Sellers accepted our offer of $28,000.
Bank loan terms:
20 year Amortization
Interest rate 5.50% fixed for 5 years then adjust to WSJ Prime plus 1%
Waiting for results on inspection and survey supplied by seller.
Rental Property Investor · Brattleboro, VT · Member since 2015 · 204 posts · 174 votes
8y
have you shopped around for loans? seems like you could get a 30 year fixed for less than 5.5%
I just financed a single family rental for 30 years fixed at 4.85%
Longview, TX · Member since 2017 · 26 posts · 17 votes
8y
Yes, banks here aren’t wanting to go longer that 20, for the age. I agree a 30 fixed is better. I plan to refinance in couple years. 5.50% is high and I was very surprised at the quote with my credit being 800. I didn’t take the time to go to any mortgage companies after my wife was told in a real estate continued education class that the mortgage company didn’t do anything lower that $50,000.