I'm considering a buy and hold or potential wholesale deal in Memphis, TN and would greatly appreciate a second opinion.
ARV: $55,000 Purchase price: $43,500
Rent: $775 / Occupied
Mgmt: $77.5 Repairs & CapEx: $117 Vacancy: $64
I can get financing with %15 down, 20 year loan, 3/1 ARM, est. %5.6, my PITI is around $406.
Rent $775 - Expenses $258 - Financing $406 = $110 in cash flow
It feels a little thin. My total cash to purchase the property will be $6,500 + closing.
With a contract for $43,500, I don't think there's much room for a wholesale opportunity & a 30 year loan would increase my cashflow by about $40/mo but I can't seem to find one right now.
The property is a 3/2, 1,000 sq. ft. the lease renews in August, month to month, at $825. It was originally purchased as a turnkey investment about 5 years ago. Hot water tank is 4 yrs old. Ext.A/C unit is about 2 years old. The rent roll and tenant history look good.
Thank you in advance for any thoughts.
@Ben Roberts I’m not a local Memphis investor but I own rentals there, with Plans to buy many more. If you are willing, feel free to send me a Connection as I love getting to know local Memphis investors.
So to your deal, is rent of 775 market or below market? How many square feet is the house? For a 3 br 2 bath, depending on the area, I’ve typically seen 800-850 for rent.
I think that combined with the financing being on a 20 year amortization is where this deal falls a little short. Now if you can’t do 30 year and go with this financing, but can bump rent to say 850 when they leave in August or you don’t renew or just bump their rent to that, combined with the fact that you’d be getting it under market value by a fair amount, I’d probably do this deal.
This ofcourse is assuming the area it’s in is good.
@Caleb Heimsoth $775 is probably a little above market rent. I think market rent should be a bit closer to $725-$750. If you're at all familiar with the area, it's on Carlyle in 38127. The fact that what i'm looking at is 3/1 ARM and only 20 years doesn't sit too well. Getting financing in this price range is proving to be a greater challenge than I had hoped.
@Ben Roberts I sent you a message but what you just said about rent I would pass on this deal.