All Forum Posts by: Mark S.

@Sheri Ulm, are you saying that I should or shouldn't move forward with this one?  It's great that you're finding deals like you've mentioned, but I've never seen anything close in my area.

I feel like at this price point, I almost can't go wrong. I'm hesitant to post this due to others on the site from my area (and possible competition, if you will), but this is a HUD property. The HUD repair escrow is about $2,500. This brings another question to surface, which is, does this mean if I buy the property, HUD provides these escrow funds for me to make repairs? Also, are their repair estimates accurate or normally low? Hope this helps a little. Thanks, all!

@Sharad M.  I actually have no idea how much it would cost to get it repaired or rent-ready.  I'm just looking at some preliminary numbers at this point, and haven't actually done a walk-through yet.  The property is listed in the low $30Ks.

@Kenneth Huddleston   In this particular area, there's no way a 2BR/1BA would rent for $700/month regardless of repairs.

@Sheri Ulm The property is in Kentucky.  I'm afraid $8-$10K will not take this one down.  I still need to get an estimate on the work to be completed.  

@Tyler Wenzel  Believe it or not, I would probably finance the purchase with a 30 year fixed mortgage at around 4.7%.  I would very likely pay this off much sooner than 30 years.  I show $103.73/month for P&I with a $25K purchase price and 20% down (so, $20K loan).  Property taxes are just under $600/year.  I am familiar with the 50% rule and 2% rule.  In my area, 1.5% seems to be a "great deal" from what I've seen; I've rarely come across anything near 2% (until recently).

@Bill Jacobsen  Using the PropertyAnalyzer spreadsheet on the website, it shows a 8.26% cashflow over initial investment or a 6.92% cap rate (using $5k closing costs - which I've been using across the board, but very well could be lower with a property in this low price range; also a $295 property management start-up fee).

@James Syed  Property taxes are just under $600/year.  I need to get an insurance quote, but I'm guessing around $75/month for insurance.  As owner, I would not be paying utilities.  I need to find the vacancy rate for the area.  I almost always use 8% or 1 month for all my estimates.

@Bradley Benski Thanks for your thoughts. My long-term REI goals are to generate enough positive cash flow to achieve financial independence. This will likely take me many years. A more short-medium term, secondary goal would be to build wealth over time through property acquisition, principal pay down via tenants' rent, (hopeful) appreciation, etc.

@Martin Scherer  Thanks for your comments.  I, too, find the 2% rule very hard to come by.  Here in Kentucky, real estate is generally much less expensive than other parts of the country.  I'm from Massachusetts originally, and I couldn't buy a parking space for $20K there (you know what I mean! haha).

@Rolanda Eldridge I figured that if I could pick this property up cheap and be all-in for under $30K and rent it out for at least $475/month, that I'm still doing okay at almost a 1.6% (vs. the 2% rule). The other cash flow metric I've heard thrown around on the site is $100/month/unit. Depending on whether I'm using the spreadsheet (not quite there) or the 50% rule (slightly over that), I'm right on the line of this $100 goal. Some investors have said that they use this for multi-family, but for SFR, they need to achieve a higher monthly cashflow goal. Being my first property, I figured it might be a low-risk way to get started and generate a decent return. I don't believe converting it to a 3BR is an option.

2BR / 1BA house. 1,150 sq ft. 50 yrs old. Heating needs fixed. Plumbing (bathroom needs plumbing hooked up and basement has broken pipe) needs repair. Median rent is $550/month, but I think it'd be closer to $475/month. Area is not the greatest, but there are a lot of children living there, so it shouldn't be too bad (but I personally wouldn't live there). Location is pretty convenient (close to schools, downtown, etc.). Thanks in advance.

Many of the properties I've been looking at - in lower income type areas - have a few registered sex offenders on that same street.  Is this an immediate no?  Would you still invest in that area?

I would feel pretty terrible renting to a family knowing there's a registered sex offender on that particular street.  Are registered sex offenders a protected class?  Can you refuse to rent to them specifically as part of their background check coming back as unsatisfactory?

@Andrew L. 
Ouch!  Haha.  Believe me, I've thought of that.  The thing that makes it difficult (which, I guess is simply an excuse on my part), is that I know him personally and he is also involved in the property management company I'm considering using.

@Bradley Benski
You're correct.  I shouldn't sweat the small stuff.

Everyone else, thank you very much for the comments.  I've decided not to pursue this deal and look for the next one. 

I feel like I'm already getting "beat up."  My initial offer was going to be $50,000.  My agent basically said that I run the risk of insulting them, coming in too low, and then they can choose not to respond.  I said, fine, let's go to $55,000.  He went to listing agent and without us ever formally submitting the offer (which, in his defense, he said he would if I really wanted him to) and basically said, hey, if we make an offer, it's going to be under $60,000; we want to make sure we have a dialogue before we take the time to put it together.  Listing agent told him that they've already rejected offers much higher (high 60s).  He's now advising me to let it go unless I'm willing to come way up.  It just pisses me off because I requested police records (which I have to pay for), had my lender update my pre-approval letter, got my insurance guy to get me a quote, etc.  So, if anyone's time is wasted, I feel like it's mine.  

Based on what most of you are saying, even $55,000 is on the high end.  Sounds like I should just walk.  Believe it or not, this is actually a good deal in this area.  

The exterior is Stucco. The neighborhood is questionable. I've submitted a request for police records for that area. I believe there's some Section 8 on that street.

Hey guys, 
What would your max offer be on the following property:

Duplex (950 sq ft each) - 2BR / 1BA units.  30+ yrs old.

MONTHLY INCOME
Rents: $500 x 2 = $1,000/month.

MONTHLY EXPENSES
Vacancy loss (@ 8% or 1 month): $80
Property Mgmt (@10% only when occupied): $100
Property Taxes: $70 (from PVA)
Property Insurance: $75 (estimated)
Ongoing Repairs/Maintenance (@10%): $100
Cap-Ex/Maintenance Reserves (@10%): $100
TOTAL MONTHLY EXPENSES: $525 (which seems in-line with 50% rule)

FINANCING
20% down, 30 year fixed loan, 4.70% interest rate.

Principal & Interest Payment
At $55,000: $228/month --> Monthly Cashflow (CF): $247
At $60,000: $249/month --> CF: $226
At $65,000: $270/month --> CF: $205
At $70,000: $290/month --> CF: $18

Purchase price will likely be between $60,000 - $70,000, but want everyone's opinion.

REPAIRS NEEDED
At first glance, minimal repairs seem to be needed:

1.) One unit needs to be re-painted.
2.) Flooring likely needs to be replaced (tile).
3.) Gutters on outside need fixing.
4.) Possible beetle/bug problem.  Saw at least 4 during walk-through.

OKAY, EVERYONE, LAY IT ON ME!

You can definitely negotiate, especially with Sears. I bought a bunch from them and saved about $4k off online pricing. I also was buying top of the line new, for my primary residence, not a rental. I wouldn't dream of spending that on a rental.