ad says
A brick home in central Hamilton. High ceilings, lots of character. 2-2 bedroom suites, 2-1 bedroom suites. Gross annual income $30,180, tenants pay hydro. One bus to Mac. Well maintained, new windows, some new doors, kitchens and baths. Just take over and collect rents
Price: 240 000
sold by owner on a classified.
im 18 years of age, have 7500. make about 500/month income.
possible?
should i try it?
lookin for a first deal
ofcrouse im going to offer maybe 207500 or something along those lines.
thanks
I don’t know whether it is a good deal or not, but right off the bat, you never ever take the seller’s word for anything involving costs or rent or anything else that is going to affect your decision.
I wouldn’t even take his word that it is close to the bus lines. I’d want to see it myself and verify with the city that the bus isn’t about to be discontinued.
There are tricks to fool buyers about value. Is this rent righ t in line with what every other renter in the area is paying? Because even if that is Canadian dollars, that is a very high rent.
The occassional seller will do things like put a relative in the house for sale, write it up as $2500 a moonth rent, when in actuality, the “tenant” isn’t paying anything and will move out when the sale closes.
Sellers will misrepresent expenses (almost always).
Sellers sometimes have a place for sale because the tenant is intolerable and they can’t get rid of him. Can you deal with a druggie, a porn film studio, an undocumented alien flop house? Or how about the tenant who sues everybody over anything?
If you have to get rid of the tenant, can you support the house while it is empty, and maybe pay for the costs of an eviction and rehabbing the damage to the property?
I think maybe your first question should not be “Is this a good buy?”. I think your first question should be “Can you afford it?” Can you afford to weather the problems if something goes wrong?
The best and quickest way to ruin your creidt is to buy things you can’t afford. If you want to invest in real estate, protecting and building your credit should be a high priority
hey man you opened my eyes some more :shocked
i always knew sales man were crazy for money and the sale just never knew there was alot of dis honesty, wouldnt that make them lose alot of sales if people have half a brain to figure out they may be lieing or not telling the full truth
Gross Income (Assuming fully leased) - $30,180
(Vacancy & Collection Loss - 10%)
(Operating Expenses - 40%)
NOI - $16,297
Based on your offer of $207,500 this indicates a cap rate of 7.85%. He probably won’t take it, so let’s assume a price of $225,000. Now your cap rate is 7.24%. This is assuming you can keep Oper Exp at 40%. Next you need to consider the cost of your debt (the financing) to determine your pre-tax cash flow. Some terms as an example - $225,000, 7%, 30 year amortization = annual debt service of $17,963, which means a monthly NEGATIVE cash flow of (drum roll please) $139! Buying anything residential without positive cash flow is absolute insanity! The MOST I would pay for this property would probably be $150K - $160K.
Too often newbies gather information about possible deals and put way too much thought into a property that doesn’t warrant any attention in the first place. You’ll have to look at alot of properties to find one good deal.
There’s a decent book in the " Rich Dad Poor Dad" series called " The ABC’s of RE investing. I think the author was Garret Sutton ( or something like it). He has some good insight in there. That could be a start. Fom what I understand, you use the local cap rate for your area. that’s how you determine its worth. But then again, I don’t know a ot about that area either…
lol i have that book right now,
im reading the cashflow quadrant right now though, and then rich dads guild to investing.
i also have trump university real estate 101 what does everyone think of that book.
and thanks for showing me the numbers here,
i need to learn how to work that out on my own.
