There is a property for sale that is in a very good technology area in Atlanta. The house on is a ranch plan and single family with no rental restrictions and it is a three bedroom house. I am putting down-payment of 95k on the house and the mortgage payment will be approximately $1300 and the rent would be $1800 per month. Giving me cash flow of $500 approximately. The house is in good condition and the appliances are good. Needs no work and everything is good. The house will appreciate in years. The houses in that area have been leased or rented in 30 days time.
Is this a good deal?
My kids are growing up and they need more of my time and cannot do other types of buying/auctions hacks etc
Accountant · Panama City Beach, FL · Member since 2018 · 49 posts · 18 votes
6y
@Joe Dupa
I don't know the numbers for the property that you are considering, but when I evaluated a potential property I look use compare the property value to the amount of monthly rent generated. I do not invest in properties that produce less than a 1000 to 1 ratio.
That is only one factor that I consider and please understand there are many other factors to evaluate.
Realtor · Atlanta · Member since 2018 · 126 posts · 81 votes
6y
Hey @Joe Dupa, this isn't enough info to really tell how good of a deal it is. I can tell you if your mortgage is $1300 and your rent is $1800, your cash flow will not be $500/month. You need to account for insurance, repairs, cap ex, vacancy, and property management (unless you will self-manage). Where is the property located and what was the purchase price?
There is a property for sale that is in a very good technology area in Atlanta. The house on is a ranch plan and single family with no rental restrictions and it is a three bedroom house. I am putting down-payment of 95k on the house and the mortgage payment will be approximately $1300 and the rent would be $1800 per month. Giving me cash flow of $500 approximately. The house is in good condition and the appliances are good. Needs no work and everything is good. The house will appreciate in years. The houses in that area have been leased or rented in 30 days time.
Is this a good deal?
My kids are growing up and they need more of my time and cannot do other types of buying/auctions hacks etc
I think the area is great. you also have about 6% cash on cash return. Not best but not bad either.
Hey @Joe Dupa, this isn't enough info to really tell how good of a deal it is. I can tell you if your mortgage is $1300 and your rent is $1800, your cash flow will not be $500/month. You need to account for insurance, repairs, cap ex, vacancy, and property management (unless you will self-manage). Where is the property located and what was the purchase price?
Marc's remark is very important here. You need to account for all expenses related to your property, not just your mortgage. It's hard to give you a more detailed assessment without more information (is your mortgage over 30 years btw?)
A $1,300 mortgage payment over 30 years represents a loan amount of ~$360k (assuming a interest rate of 3.5%). If you put $95k down, it means the total purchase price is ~$455k approximately. Using a very approximative rule of thumb regarding expenses (i.e. that expenses will represent ~50% of your rent), I can tell you that $1,800 won't make you cash flow positive, far from it unfortunately. Then again, you need to account for the location. Properties from top locations in top cities are very rarely cash flow positive.