As a first-time property buyer, I'm taking a big leap into real estate investing and could really use your collective wisdom. I've got my eye on a property in Jacksonville, Florida, and I'm trying to gauge if it's a smart investment.
The deal:
Asking Price: $102,000
Type: 3-bedroom, 2-bathroom home
Unique Aspect: Currently rented out in separate units
Rental Income: $1,600 per month
Net Profit Post-Expenses: Approx. $1,200 per month
I'm at that crucial point where everything seems a bit overwhelming. Assessing this deal has become unexpectedly challenging, yet I'm eager to dive into real estate. I'm hoping to gather insights from those who've walked this path before.
Does this deal seem reasonable for a first-time investor like me? Perhaps there are aspects I haven't considered yet?
Any advice, tips, or personal experiences you could share would be immensely appreciated. Your guidance could be the beacon I need to navigate these uncharted waters :)
Based on just the numbers you provided; this seems like a good deal. However, when you are calculating your expenses, don't forget to factor in estimates for maintenance, capital expenditures, and vacancies. Also be sure to do a good inspection on the condition of the property. If there is a lot of work that needs to be done to the property to make it rentable, this could wind up being a large out of pocket expense that you would need to factor in. If this property is already under contract, then be sure to hire a high quality inspector to get this information for you.
If you’re getting $1,600 in rent and the $102k purchase price is somewhat close to market value… I’d question the quality of the area. Usually those kind of numbers are in really tough neighborhoods.
Based on just the numbers you provided; this seems like a good deal. However, when you are calculating your expenses, don't forget to factor in estimates for maintenance, capital expenditures, and vacancies. Also be sure to do a good inspection on the condition of the property. If there is a lot of work that needs to be done to the property to make it rentable, this could wind up being a large out of pocket expense that you would need to factor in. If this property is already under contract, then be sure to hire a high quality inspector to get this information for you.
You've gotten some excellent advice here already--I would also add that most lenders have a minimum loan amount of $100k, so that could make it hard to finance as well.
@Nadia Brown, what zip code is the property in? There are lots of C and D neighborhoods in that price range, especially 32204, 32206, 32209, 32254. There’s also lots of gentrification in those same zip codes.
Like others have mentioned that seems pretty cheap but if the area is good and there are no major renovations or deferred maintenance(e.g. old furnace, water heater) that would be cost prohibitive to you in the first few years of owning it, it seems it could be a good opportunity.
I am glad you are taking your first steps. As always, read these posts since they are very helpful in your new real estate journey.
As for this deal. Please note, the following are just my thoughts on how I would look at this deal. Others may have a different opinions. Just do what you feel is correct.
I would have the current owner provide you proof of deposits for the last two years for the rent receipts (look for steady on time payments as well as consistent amounts.). I would want to see actual bank deposits (not a quick books entry or excel sheet). Just to make sure there is the correct amounts matching the lease coming in on time. I would also ask for the lease agreements for the two separate current tenants. I would hate to see you get it and they move out the following month because they are on a month to month lease thus removing your income stream right out of the gate.
I would get an inspection on the property to make sure there is not a hidden issue of Black mold or asbestosis and such problems as maybe a leaky roof. Since you will be taking over and being responsible for the unit. If present you would be on the hook for correcting this issue all the time with dealing with the current tenants.
I would also double check the city building department since (if I am reading correctly) you have two income producing units on this property. If there is actually two units I would make sure the ADU is permitted and supposed to be there as well as up to code. I would hate for you to get it and somehow the city comes in and makes you stop renting the second unit. Double check that there are not any nuisance liens (Trash, Tall grass etc.) on it by the city. I have heard recently the city is not removing some of these but I think they are for bigger issues and should not be an issue for your deal. (I have not verified it but never hurts to ask.) You can start with the city website www.coj.net for the building department or property appraiser or the tax collectors office www.taxcollector.coj.net
As for the structure of your deal just read the forums about llc v Incorporated and all the good information that can be found in there.
One other thing I did with my units that many may not agree with is that I get a general liability coverage for each llc related to that llc and I would get an umbrella policy for you as well. This is extra above and beyond like I said but I copied this from my non-RE business.
As a first-time property buyer, I'm taking a big leap into real estate investing and could really use your collective wisdom. I've got my eye on a property in Jacksonville, Florida, and I'm trying to gauge if it's a smart investment.
The deal:
Asking Price: $102,000
Type: 3-bedroom, 2-bathroom home
Unique Aspect: Currently rented out in separate units
Rental Income: $1,600 per month
Net Profit Post-Expenses: Approx. $1,200 per month
I'm at that crucial point where everything seems a bit overwhelming. Assessing this deal has become unexpectedly challenging, yet I'm eager to dive into real estate. I'm hoping to gather insights from those who've walked this path before.
Does this deal seem reasonable for a first-time investor like me? Perhaps there are aspects I haven't considered yet?
Any advice, tips, or personal experiences you could share would be immensely appreciated. Your guidance could be the beacon I need to navigate these uncharted waters :)
Thank you in advance for your time and insights!
Hello!
I specialize in the Buy N Hold sector of real estate a real estate agent, mortgage broker, and financial planner.
And it sounds like a good deal based on the 1% rule, that for every 10k in purchase price, you get 1% or 1 dollar in rent in return. For example, 102k times 1% is $1020. So as long as you get 1020 in rent a month, you have won.
The biggest thing is to do due diligence like with anything. Make sure the bones are good such as electrical, plumbing, roof, HVAC, foundation, etc.
I don't like the sound of the separate units thing. I'd verify what rent is in case the "individual rentals" thing doesn't work out.
Start looking for your Contractor Stable and property managers as backups and sources of information.