I found a property that was just listed today through a wholesaler in my area. I like the property because it doesn’t need much work and is down the street from where I live (it is nearly rent ready). My question is, would you do a deal if it is nearly break even with the 50% rule? Is anyone doing deals for break even or holding out for better…?
It is being offered at 74k with rents at $1000-1050. I figured a 30 year conventional loan at 7.5 interest. That brings my monthly payment to $516. The wholesaler has plenty of time on the contract and conventional shouldn’t be a problem. I figured 7.5% interest because I think it would have to be an investment loan?
Overall, the numbers seem a BIT tight, but seems break even and doable. It’s also in a desirable area. Any thoughts?
I am not a big fan of SFH as rentals simply because the numbers rarely work to my satisfaction. If you have vacancies all the money is coming from your pocket. I like 3 and 4 unit buildings as rentals. The return is generally better and you can shelter yourself a little more from vacancy. What is FMV as is or ARV after a few fixes?
ARV is at 110k with repairs at 5-10k. It is rent ready with just paint.
This is a bad deal. Here is the way I see this deal:
Gross rents: $1,000 per month
Operating Expenses: $500 per month
NOI: $500 per month
Mortgage Payment ($84K with repairs, 30 yr, 7.5%): $587
Cash flow: $87 LOSS (OUCH!)
If you think losing $87 per month is a good deal, send it to me and I’ll give you $40 back each month. You would only be losing $47 per month and I’ll be able to buy a nice dinner!!! Thanks in advance!
The danger on a first deal is that you have the fever to do a deal…any deal. This deal would exist 2 years ago which means it is a pedestrian deal. In this climate you need to be looking to hit a homerun. You have to wait on your pitch. This is a buyer’s market which means you should find deals that are not normally out there. I would wait for one of them. I think Dallas is a lot like Houston. You should be looking to buy at around 50 cents on the dollar. You say the house is being offered at $74k. If the ARV is $100k, you should be looking at getting it for at the MOST $60k. I would offer what I want to buy it for…I would offer $55k and see what happens.
I just got into landlording and I’ve made sure I’ve done my research before I dipped my toes in the water and all I can say to you is it’s all about the numbers. I work my numbers backwards to come up with my offer price. This is the price that stands no matter what the asking price is. I figure this is a volume thing like bluemoon said earlier the more pitches you get the better your chances of getting that homerun. Also I been flipping for 5 years and I see flipping SFH’s is safer than renting unless they are vacation rentals in bright sunny areas. Just my two cents.
Well, I was looking at it from the standpoint of just adding paint to make it rent ready and not 10k. But I see your point - it’s still a bad deal as a rental…
You’re right, I do have the “1st deal itch”. haha At the same time, I don’t want to jump into a stupid deal. Thank you for all your advice/opinions, it is appreciated as always!
Offer the price where the property’s numbers work. You want a minimum of $100/mo/unit using the 5o/50 rule. Figure out those numbers to get YOUR purchase price. They may reject it, but they also may accept at a later date.
This isn’t a good candidate for a flip, let alone a rental.