Asking Price: $30k
Past Rent: $450/month
Property is a 3 bed, 1 bath sitting on 1 acre in my hometown of Valliant, Oklahoma. (Small Rural Area)
Owner says the home stays rented well and that he was able to get $450 per month. Home was last rented about a month ago. He is selling due to relocating for work.
The property is somewhat older, I am unsure of what year it was built. Interior is outdated; ceiling tiles, old ugly linoleum, wood paneling, bathroom/kitchen plumbing, outdated lighting fixtures.
Owner says it rented well, but I would feel better if I made a few cosmetic repairs to brighten the place up a bit. Is that a good idea or waste of time/money?
I am a carpenter and cabinetmaker so I would take on the repairs myself to save on labor.
For now I only have a few pictures of the exterior. Let me know what you guys think! This will be my first rental property, while I am excited and ready to begin, I also don’t want to jump into a bad property. I appreciate the help and if I left any important info out please let me know!
@Kolby Wright what do you want to do with it?...generally my initial reaction to any deal like this is to;
1) Ask the seller if he owns it free-and-clear...in this case I would assume yes
2) Ask the seller if he is interested in getting rid of the property but keeping a monthly check
3) Setup terms for a down payment and note/mortgage...maybe a few grand down and a couple hundred bucks a month?...
4) Close the property...
5) Keep it and let your tenant pay off your mortgage
I am looking to buy and hold long term as a rental property.
In your opinion, is it unwise to buy an older house due to the fact that things are likely to start going bad/failing and will need replaced? I understand this can happen in any house but just a concern with this one for sure.
Thanks for your reply!
I am a very simple numbers kind of guy. let's say you mortgage that property. $30000 at 5% puts you at about $170/month. I live in rural MO so I assume taxes and insurance are comparable. you'd pay about $100/month for insurance and taxes. figure in your 10% vacancy/repairs. you could argue repairs would be higher on an older home. add all that together you're about $315/month. is it worth taking that risk for $135/month?? I would say no. I look to clear $200-$250 on my homes in this condition/market.
Now, if you find that if you clean it up. use your cabinet making skills and get it to a $600/month rent for a $2500 investment in the house....now we're talking.
@Kolby Wright I agree with points that both @Martin Tyler and @Brandon Sturgill made...if he's relocating for work, maybe he'd be interested in taking some cash to help with the move but then receive monthly payments. It can't hurt to ask.
Additionally, look at the potential in the area. Are there other properties renting for much higher than $450? Or are you pretty well capped there? If you're at the upper band of your market, there's no sense in redoing cabinets, flooring, etc. if there's steady demand.
But if there is upside potential and you can increase rent by a bit using the skills you have, then it's probably worth it. Remember-you aren't living there. Don't waste money and time making updates that you'd love to have, but won't actually yield any return.
That ties into the last question you had about the age. Nothing wrong with older houses if you plan accordingly and have the reserves set aside (both up front and monthly) to cover any major repair that may happen. If you can do that and the numbers still work, great. If not, it's not the right choice.
@Kolby Wright you may be asking the wrong person...I recently purchased a 6-room hotel built in 1838, lol...this stuff scares a lot of people, but if you know what you're looking at and what you are getting into its fine. I can't exactly tell from the photos you posted, but that looks like a typical framed ranch structure...1950's built?...these are great properties...that soffit on the foundation is a first...does it have a basement?...block foundation?..anyway, the long and short of it is that houses are very durable...its amazing how well houses are built. As long as there are no fatal flaws and systems are in working order, you can set aside a fund for repair/replace...
This is all part of your due diligence...step one would be to remove the property from the market where competition may swipe it from under you and then figure stuff out.
@Kolby Wright Most of what other people said I agree with so I won’t go into that stuff as they have said it already. About the older homes... in my opinion it’s not riskier providing you did your due diligence. Get a proper home inspection done and maybe even get a contractor in there to look at it for you as well. I have a friend here in Virginia with a home built in the mid 1760’s that has less problems and performs better than his nightmare property that was built in the early 1980’s lol.