Should I purchase my sister's rental property?
Springville, UT · Member since 2016 · 13 posts · 0 votes
Should I purchase my sister's rental property?
Most Popular Reply
Humble, TX · Member since 2020 · 14 posts · 9 votes
6y@David Latu you should get the house appraise first don’t believe the numbers on Zillow or Redfin they are usually wrong. And I hope you are not getting your number from Zillow or Redfin either. If you are you might want to do more research. 
34 Replies
I think a $375,000 single family home should rent closer to 1% of the purchase price. If you are paying $300,000 you should at least get close to $3000 per month by the 1% rule. These tenants have a lease so you don't even have an opportunity to raise the rent. They will leave if you raise it even to $2800 when the lease is up. Did you check the rented amounts of other $375,000 SFHs in the area? I would not buy from a family member. Unfortunately, even if you are trying to help her out, that will always comes back to bite you. Have her find another buyer or keep it and raise the rent next lease and qualify new tenants. Buy your own investment, you will be happier and learn from your own mistakes, not try to correct your sisters.
I think a $375,000 single family home should rent closer to 1% of the purchase price. If you are paying $300,000 you should at least get close to $3000 per month by the 1% rule. These tenants have a lease so you don't even have an opportunity to raise the rent. They will leave if you raise it even to $2800 when the lease is up. Did you check the rented amounts of other $375,000 SFHs in the area? I would not buy from a family member. Unfortunately, even if you are trying to help her out, that will always comes back to bite you. Have her find another buyer or keep it and raise the rent next lease and qualify new tenants. Buy your own investment, you will be happier and learn from your own mistakes, not try to correct your sisters.
- 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@David Latu don’t but the property. Help her sell it for the $375k that you think it’s worth and maybe you can be compensated for your time/knowledge. Also, taking advice from others around the country regarding your cashflow numbers doesn’t help since everyone takes the cash flows of their own market and applies it to yours. 1% rule is meaningless. I would absolutely love a 1% rule property in my market and in other markets investor would never consider a 1% rule as a great deal by any stretch.
Compass5122 Reviews - Springville, UT · Member since 2016 · 13 posts · 0 votes6y
Originally posted by @Alex Kreeger:
@David Latu I respect everyone’s opinion above. I would not purchase this property unless I knew it was not at market rent, and I could get it to market rent quickly where numbers worked.
When analyzed as a property that an investor has no ties to(which we should analyze this way, even though we have ties sometimes) the numbers don’t work.
Thank you Alex for your opinion. The market rent is at it's value. (I got the market rent from a property management company in Utah)
- Springville, UT · Member since 2016 · 13 posts · 0 votes6y
Originally posted by @Robert Campbell:
@David Latu. Without running any numbers at all, I would be wary of that unspoken rule of not selling for the equity. Seems like a goofy deal footnote that is a disadvantage for you. What if it’s not worth $375k in five to seven years when you want to sell?
With $75k in cash, you could buy another place that cash flows $200+/mo and not even have to worry about what happens with your equity.
I suppose it all comes down to your motivation. Are you a prospector or do you want cashflow?
@Robert Campbell. I want cash flow. You are right. If I was to purchase this then I would need to sell it the next day. I have scheduled an appraiser for this Thursday. I am excited to see what he says.
- Springville, UT · Member since 2016 · 13 posts · 0 votes6y
Originally posted by @William Walker:
I can’t believe people are saying this is a good deal. 300k purchase price and rent or $1600????
Rent minus mortgage payment does not equal cash flow.....You're going to be losing money on this every month you have it with the hope that the market values the property at 375 in 5-7 years. Your ROI is negative until you sell it. May still be negative though
If you bought this property for 300 and sold it within a year for 375 then reasonable.
@William Walker I sure wish I could apply the 1% rule in Utah. If i was to use the 1% rule then I would have an ROI around 22%. The property is scheduled to be appraised this Thursday. - Springville, UT · Member since 2016 · 13 posts · 0 votes6y
Originally posted by @Donna M.:
I think a $375,000 single family home should rent closer to 1% of the purchase price. If you are paying $300,000 you should at least get close to $3000 per month by the 1% rule. These tenants have a lease so you don't even have an opportunity to raise the rent. They will leave if you raise it even to $2800 when the lease is up. Did you check the rented amounts of other $375,000 SFHs in the area? I would not buy from a family member. Unfortunately, even if you are trying to help her out, that will always comes back to bite you. Have her find another buyer or keep it and raise the rent next lease and qualify new tenants. Buy your own investment, you will be happier and learn from your own mistakes, not try to correct your sisters.
@Donna Mincuzzi I sure wish that I can use the 1% rule. If I could then I would have an ROI around 22%. The rent amount was evaluated by a friend of mines who worked at a property management company. The property is going to be appraised this Thursday. So if the equity is high enough then I would probably sell it the next day.
- Springville, UT · Member since 2016 · 13 posts · 0 votes6y
Originally posted by @Twana Rasoul:
@David Latu don’t but the property. Help her sell it for the $375k that you think it’s worth and maybe you can be compensated for your time/knowledge. Also, taking advice from others around the country regarding your cashflow numbers doesn’t help since everyone takes the cash flows of their own market and applies it to yours. 1% rule is meaningless. I would absolutely love a 1% rule property in my market and in other markets investor would never consider a 1% rule as a great deal by any stretch.
@Twana Rasoul You are right. The 1% rule doesn't work in Utah. If I am able to rent the place for $3,000 then I would have an ROI of 22%. You can live in a million dollar mansion in Utah with $3,000 in rent. The property will be appraised this Thursday. If it's worth more then $375k that I would just advise my sister to sell it.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.