Looks good! Or does it?...

25 Replies

Hey BP community, wanna share what I have on a property and you can tell me what you think. Asking 149900. Offering 140000. Good, growing area. House will need a little new flooring, painting, and landscaping (3500). Needs Washer and dryer. Roof looks pretty good. My agent assured me we could rent it for at least 1350, but Rentometer says average rent in area is 1175. How accurate is rentometer? With all of that, cash flow looks like 390 a/mo (5%vac,5%repair,8%capex) and ROI 13.3%. A family member is putting down the 20% and I am managing property. Thanks for all of your help!

@Caleb Anderson

Whats the ARV? Rentometer is accurate at least for me. You can also look online for Section 8 fair market rent that would give you a pretty good idea.

@Redgy Saint-Germain

Honestly, I haven’t spent too much time deterring the ARV, which is a mistake on my part. I’d say 159900. I’ll check out the sect8 you mentioned.

@Caleb Anderson

Yea if your ARV is shy of 200k the deal would be interesting because you can make money while buying the deal.

Also why 20% why not use an FHA loan and only use 3.5% down then invest the 16.5% to buy another property ?

@Redgy Saint-Germain Ok, cool. This would be my first deal, and I was trying to partner with my Father in Law on this one, just to get my feet wet. The next one I was thinking about using FHA, can't you only do them so often?

@Caleb Anderson

You can have only one at a time until you refinance. You can still get one under your name because they will allow your father to " gift" you the downpayment to buy the property. Just ensure you have your income stuff situated. 

The only draw back is that you have to live in the property for a while, so it will not cashflow until you move out based on the FHA guidelines. I would look at a 2-4 units for an FHA that way you can live rent free and still cashflow

Originally posted by @Caleb Anderson :
Hey BP community, wanna share what I have on a property and you can tell me what you think.

Asking 149900. Offering 140000. Good, growing area. House will need a little new flooring, painting, and landscaping (3500). Needs Washer and dryer. Roof looks pretty good. My agent assured me we could rent it for at least 1350, but Rentometer says average rent in area is 1175. How accurate is rentometer? With all of that, cash flow looks like 390 a/mo (5%vac,5%repair,8%capex) and ROI 13.3%. A family member is putting down the 20% and I am managing property. Thanks for all of your help!

140k and 1175 rent is not even hitting the 1% rule .. how about taxes insurance and so fourth .. you not going to make much on that deal . 

I think you need to rework the math on this. Are you going to be paying back the 20% from the family member? Your cash flow is too high based on the rent and purchase price.

@William Walker Thanks for the reply. I ran the numbers like I normally do. I am kind of running into an issue lately where the all of the deals I run have good cash flow, so I'm not sure what I'm missing. Any advice would be great. Thanks!

@Caleb Anderson You may want to do your own due diligence and call around on similar properties for rent in the area. Be sure you actually know what homes are renting for in your area before you run the numbers and make a decision. Property managers and apartment managers are also good sources of information when it comes to finding out market rents. Good luck! 

@Rachel H. Thanks Rachel! I think I'm getting too excited to get this going. My realtor is very confident I could rent for what I quoted earlier, and I trust her a lot. BUT---- trust but verify!

@Caleb Anderson

Very excited for you sir! There's nothing like your first deal!

However, please do yourself a favor and re-work your numbers, and then triple check them.

The first concern I saw was your $3,500 in repairs. Is that for flooring, paint, and landscape? That seems very low to me.

Secondly, if the home is only worth $160,000, and you're buying it for $140,000 after closing costs, holding costs, repair costs, etc, you're going to be pretty close to the $160,000, all-in. I wouldn't necessarily classify that as a "deal". And that's even if you get it at $140k. The seller might negotiate you further up after your initial offer is made.

Lastly, even if your broker is right in their $1350 per month figure, that seems low for a home worth $160,000.

I know you're anxious to get your first deal, but sometimes patience is the best practice. I'm sure you can find a solid home that only needs minimal repairs where you can capture a LOT more equity and achieve at least the 1% rule or higher. 

Then again, I'm not in Locust Grove, GA, so you'll have to trust yourself on this one. But you're asking for opinions, and I figured I'd share mine.

Hope this helped!

Good luck!

How many bedrooms? I looked up FMR (Section 8 fair market rents) for Locust Grove. $1150 for two bed, $1500 for three.

Hey Caleb, 

I am new as well and still looking to land my first deal.  Based on what I've read, you still want to factor in your cost for property management.  This may be why your deals all look to be so positive.  Even if you do the PM yourself, you would still want to factor in around 10% I have heard as you will not always be managing the property once you grow into more properties.  Just a thought.  Hope everything works out and good luck!

Thanks for all the advice and support! I am definitely going to rework it and reconsider before going through with it. I have a lot of faith in my agent, I've known her a long time and she's been doing things like this in my area for a while. Also, my FIL and I are splitting cash flow 50/50, and he's getting his initial investment back when property is sold, anything else would be split 50/50. I know it's not 1% rule exactly, but I'm willing to not make as much $ as I could just so I can go ahead and start to figure out the issues and roadblocks first hand and get my career moving.

I’m looking for my first deal now to in a somewhat similar situation with the down payment as you. I’m also in analysis paralysis with running the numbers over and over again and over thinking everything, making it almost impossible to pull the trigger on an offer.

At the same time though, you’d be better off analyzing again. As some others have said, not sure if you are counting in insurance and taxes as well and I usually look on Craigslist, rentometer and Zillow for comparable rents to get a better idea and not just taking someone’s word on it.

Good luck though and hopefully we both get this thing going ASAP!

@Kevin Means Thanks Kevin. Good to know I'm not alone, but I will do that. I might just post a small breakdown of my numbers after work tonight, and maybe y'all can look at it and tell me what I'm missing.
@Van Blackman @Rachel H. @Redgy Saint-Germain @Ethan Henning and anyone else... 104 Kimbell Farm Dr Locust Grove, Ga 30248- Asking 149900. Offering 140000. 3bd/2bth. I know this area very well, and there is definitely a lot of job and residential growth. Renovating some floors, exterior, and painting walls. Maybe 3500. (I personally will lay flooring and fix exterior.) Needs washer and dryer. (700) Family member putting down 20%, their investment reimbursed when property is sold, cash flow is split 50/50 between us. Rent-1390. Tax-160. Insur-55. Vac-70. Capex-140. Repair-111. Mort-595. Mgmt- 140. Total=1271. CF=119 a/mo. I won't be using Mgmt company, but I will account for it. Thanks for taking the time to read. Any advice you have is EXTREMELY appreciated, and let me know if I missed something. Thanks!
@Rachel H. Not sure why it didn't properly tag...

I like rent-o-meter a lot, it is more detailed, shows a $range and the location of properties near yours...

In addition, check craigslist, Zillow, hotpads.  You can't overcheck.

I learned a BIG lesson the first time I rented out my home, its a completely remodelled home, and in a desirable area... I listed it on CL for to LOW, and got flooded with interest... make sure you know your rental market before you list. Better to start higher, can lower if needed.

Condition and area make a Big difference on what you can get for rent... I also have a very tight application process, which has resulted in excellent tenants, I haven't had one problem, yet! thankfully!

Best to you!

Fyi, I just tried FMR and it came in $350/mo less than I'm receiving for rent.

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