Rental Property Investor · Sedona, AZ · Member since 2018 · 260 posts · 141 votes
6y
Hey @Geren Knight III, unless you've toured the property with a contractor and they've quoted you $10k for your repair budget, it might be a good idea to budget more than that for up-front repairs. I would expect a property that is selling for $42,000 to need quite a bit of work to get it to an ARV of $84,000.
Rental Property Investor · Sedona, AZ · Member since 2018 · 260 posts · 141 votes
6y
Hey @Geren Knight III, unless you've toured the property with a contractor and they've quoted you $10k for your repair budget, it might be a good idea to budget more than that for up-front repairs. I would expect a property that is selling for $42,000 to need quite a bit of work to get it to an ARV of $84,000.
Investor · Cumberland, MD · Member since 2019 · 45 posts · 13 votes
6y
@Richie Thomas thank you for the feedback. I did not walk through it with a contractor. Another investor and I walked through it. There appears to be only minor upgrades needed (paint, carpet). The house is currently being rented. I will line up a contractor to look at the property as well. I am concerned with the low cashflow starting out. Is that really an issue though?
Rental Property Investor · Brighton, IL · Member since 2019 · 431 posts · 139 votes
6y
@Geren Knight III for what it's worth, I have yet to purchase a property myself, but I usually put my monthly expense percentages a little higher. 10% for vacancy, repairs and maintenance, and CapEx. Maybe you're figuring them lower per the rehab, but it sounds like minor repairs, so you may want to readjust those numbers. Yes to me the CashFlow seems low at only $95 using the 50% rule. However a lot of the more experienced investors have told me they don't go by those numbers...
Hopefully one of them will chime in, but thought I’d throw those thoughts your way. Again I have no skin in the game yet myself, been educating and analyzing like crazy to this point. Best of luck my friend
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
6y
That's a nice jump in value for only $10k in repairs. I'm sure you're looking at sold comps to determine the ARV. The cash flow looks good but I'd be concerned with availability of good tenants. At that price in my market that's a C-, D class neighborhood. I wouldn't be interested in management or tenant issues long term.
Investor · Cumberland, MD · Member since 2019 · 45 posts · 13 votes
6y
@Account Closed thank you for responding. I have been trying to educate myself as well and that is why the low cashflow gave a red flag. I will double check my numbers.
Investor · Cumberland, MD · Member since 2019 · 45 posts · 13 votes
6y
@Jaron Walling thank you for the post. That’s the surprising part. This house is actually is a nice neighborhood (class B). I spoke with a property manager and they confirmed my 5% vacancy factor. I am guessing that the owner just wants out. That’s the only thing I can think of.