Help me analyze this deal

9 Replies

Are you financing 100% of this purchase?  As it is, it looks pretty tight; enough so that even relatively slight deviations from your assumptions can derail the deal.  (As evidenced by the 50% rule result)

Keep in mind the more leveraged, the more critical it is that the underwriting is well researched

Also, typically at 100% financing, there should be a pretty good cushion built into the deal.  

Are you relying on seller's representation that you can get 950 a side?  

Just because the BP calculators say you will profit on sale about $23,000 five years from now, there is absolutely no guarantee that will happen.  We could be in the depths of a buyers market at that time.  

You’d borrow 203k in hopes of making 197$ a month .. that’s pretty pathetic of a return
This idea of making 23 grand in x amount of years is speculation because You have no idea that is going to happen sir . Your place might be worth less than you bought it for in 5 years .

Oh but real estate never goes down! Lol, in my area I feel that the market can hold if not grow. My market wasn’t really affected in 2009. Been thinking about it all day if this is a investment or speculation. I figure if I held the property long that is ok as well as it still cash flows. 

If the area was not affected by the 08 crisis, I'm not too sure about banking on solid appreciation there.  They kind of go hand in hand.  But I'm no expert in your area, and I'm not sure where this property is.

I'll just repeat that at 100% financing, I would want to see more meat on the bone in order to be comfortable moving forward.  Are homes like this selling quickly at this price or sitting on the market for a while.  Offer 175k and see what happens.

This will be on the market for less than 90 days and will sell close to asking price. I can’t figure out how people are making any money in this market. But they keep buying them. 

Imagine you were a Chinese billionaire, and you desperately wanted to move as much of your money overseas because of uncertainty in your currency.  The house you're looking at pays a cash buyer 7% on his money.  If things don't go perfectly maybe 5%.  Downside is somewhat limited because these type of areas don't get crushed in a downturn.  Even if you break even or lose 5% on this house in 5 years, it's still a huge win for you because your main goal is to acquire hard assets outside your country and particularly in the US.  

Now substitute Chinese with Russian, Indian, South American, heck even San Franciscian and New Yorkian.