1st RE deal

4 Replies

I hear the first one is the hardest. Here it is...

3/2 ranch

Cost $39,000

Comps vary from $25k to $45k, most properties in the area are rentals, the ones at $25K are in questionable condition

this one belongs to a co-worker who needs to reorganize due to divorce, he had dropped the price $10K. There is already a section 8 tenant with about 9 months left on her contract. She has been there 3 years and pays on time. He has maintained the place well and it doesn't need any work initally (pending inspection of course)

average rents in the area $600/mo

I can put 10% down, if not a little more

Let me know if you need more info. I am sure I am leaving something important out of the equation.

Brandon

Brandon,

I don't like the fact that the purchase price of this property is near the high comps. I think that you can do better - a lot better. I'm also a little concerned about the way you described the rent as "average rents in the area". Is $600 the rent on this property with the current tenant.

Here is how I see the numbers on this deal:

Purchase price $39,000
Gross Rents: $600
Operating Expenses: $300
NOI: $300
Mortgage: $259
Cash flow: $41

In my opinion, the equity and the cash flow are both too low to make this a deal.

Mike

Originally posted by "MikeOH":
Brandon,

I don't like the fact that the purchase price of this property is near the high comps. I think that you can do better - a lot better. I'm also a little concerned about the way you described the rent as "average rents in the area". Is $600 the rent on this property with the current tenant.

Here is how I see the numbers on this deal:

Purchase price $39,000
Gross Rents: $600
Operating Expenses: $300
NOI: $300
Mortgage: $259
Cash flow: $41

In my opinion, the equity and the cash flow are both too low to make this a deal.

Mike

Ok. I don't think I could get him dowm much more. He has spent too much fixing it up.

Sometimes you have to walk from them. Don't feel that you have to buy a property right now. One that will meet your needs will come along. That said if you want to it the numbers are thin but it will work.

Ok. I don't think I could get him dowm much more. He has spent too much fixing it up.

That fact that he overspent on the property is not your problem. He's the one that overdid it and now wants to sell. As Ohio Realtor said, either get your price or walk away. Even if you don't get this now, a few more weeks or months in a declining market may make him desperate enough to sell at YOUR price.

Mike