How to make this a good first rental prop.

I have been reading on this forum for about a year now just soaking up all of the valuable information. Now i’m looking to purchase my first property, which by chance used to be the house i rented and is currently rented by my brother. The property is technically a 2 bedroom 3 bath but really has 3 bedrooms (bedroom downstairs doesn’t have the closet directly in room it is connected between the room and bathroom, kinda weird and hard to explain, sorry.) I’m not trying to say its worth more because of that just that you can rent it as 3 bedroom if need to.

here is the deal, new furnace, newer roof, new dishwasher, older stove, hardwood floors throughout, except for one room with dark brown carpet. so minimizing risk on taking hit up front with something going out (elec stoves aren’t that expensive to find, new/used). I know there are some issues with the 2 showers as the doors leak and also need some cocking around the base of the units. that would be my major worry about how much rot is under there, but for the sake of this thread lets say i inspect it and it comes out ok.
Are there any other things as far as appliances, etc i should look for as potential problems?

now here are the details. asking 77,500 for it and i know it has rented for the past 2+ years at 725 a month going through a rental company that takes 10%. taxes per year are $1,361.24. the current owner bought it in 1989 for 37,500 (i know this doesn’t really matter, but i try to always check what they paid and when to see if the property has turned over frequently, etc. (does anyone else do this?)). the property is located inbetween the real estate office (in front of house) and condos behind and around the property. so the area isn’t decripped or low income or anything.

i know ppl are reading this and saying whoa whoa whoa, and i know i’m a newbie but not stupid. My question is what price do i need to get this for to make it a good deal cause as it stands right now its not even close. and i learn best by having a deal that pertains to me as opposed to the other peoples i’ve read about.
Other information, in Ohio, North central (wooster, in case property manager is near me, haha) Even selling this house to a family i don’t think its worth 77,500. I’m thinking that i would need to get this for a lot lot less to make it worth it.

what other things am i missing here? I know insurance is one but have never looked into it so not sure how to factor it in. Mortgage i know but that is going to depend on what i can purchase it for and thats what i’m asking. also most of the time i come by a formula i try to copy and paste it into word document and save it for future reference, but all of the ones i have are for rehabbing. what is the 50% formula and how to use it correctly. if i could buy this property for 60k would it be a good deal? what is the highest offer i should even think about making?

say purchase for 60k = mortgage with insurance circa $500

  • prop manager fees of $72.5 = 572.50
    725-572.5= 152.50 cash flow a month.
    I know i’m forgetting something!!! Renters pay all utilities

thanks in advance to everyone, i really enjoy reading these forums and appreciate the time and help everyone puts into it and i’m looking forward to getting started investing and land lording in the near future.

You’re forgetting vacancy fees, misc fees such as snow removal and other misc issues that may pop up, and maintenance fees. Also, you may or may not include marketing fees in there as well but you may be able to tie that in with the misc fees.

Look for another deal…You need the monthly rent to be %2 of the asking price…You aren’t even at %1…take your monthly rent times it by 12…then take out %10 vacancy,%10 management fee,%5 rehab,taxes,insurance,water,mortgage and if you pay the utilities…Then tell me what you have left…I’m betting this deal is a serious losing proposition…

I was bored so I figured your deal out for myself…

Based on $65,000 buy price with %20 down ($13,000 + $3,500 closing costs) $16,500

Annual rent roll $8,700
$1,350 taxes
$2,175 %10 vacancy,%10 management,%5 rehab,snow,lawn,repairs
$600 water
$600 insurance (which I think is too cheap)
$4,363 ($52,000 mortgage 30 years at %7.5…$363.58 per month)
NEGATIVE $388 a year…That’s like Negative %2 a year in cashflow…

Offer the person $30,000 cash and see what they say or pass on this deal…It’s no good…

I have been reading on this forum for about a year now just soaking up all of the valuable information.

If you’ve really been reading this forum for a year and don’t understand the math regarding rentals at this point, you should NOT think about buying anything. Sorry to be blunt, but if you don’t understand this after a year, you’re aren’t going to get it.

Good Luck,


maybe i didn’t word the questions in my post right propertymanager.
i didn’t say… “hey i think this is a good deal to buy at 77,500 and rent for 725” i said what should i offer on this property to make it work.
i don’t have the formulas for rental properties. i’ve been saving formulas for rehabbing because that is what i was intersted in. i thought i would ask since this is a property that i’m familiar with.

thanks rookienyc, its hard to take that first step because you always want to be certain your not going to get burned. i was thinking the maximum offer on this property would be around 37k but after what you’ve showed possibly not.
do people usually put 20% down on rental properties if they can get 100% financing? i understand that money goes to equity and ultimatly that is what you want to build in your properties so you can take it out if you need it and build long term wealth but if you didn’t have 20% say to buy your first 2 or 3 properties would you start out anyway you could even with 100% financing ( or close to 100, might be harder now after the sub prime mess)


Use the search button at the top of the page and search cash flow, 2% rule, 50% rule, expenses, etc.

Good Luck,


If you can obtain %100 financing and the property is still showing good/decent cashflow then make an offer…But generally I either buy with no mortgage or put down %20 but any money out of pocket is always factored into the bottomline…