Hey guys, first time invester here.
I found a deal on a first rental property, and was hoping I could get a second opinion from you guys.
It’s a two floor, 2br/2bath, 2178sqft single family house in good condition with many amenities(patio,pool,ect), and also happens to be very close to the beach. Taxes are around $6000. The ad says $140,000 neg, but I feel that I should bring the price down.
First off, being 20yo with minimal built credit, I don’t think I’d be able to get a mortgage (correct me if I am wrong). That leads me to my next point, which is: If I offer cash, is it likely that I could use that to talk them down?
Despite being a complete beginner, I want to make an investment and start learning the ropes,and the only way for me to do that is to make an move while trying to avoid any bad decisions, so I’d really appreciate any advice.
So the house has a pool, not the community?
You need to know all of these things going in…
You also need a firmer appreciation for what rents properties will command…a $140K house with $6000 in taxes, plus insurance commanding $1K in rent will eat you up with negative cashflow.
With rental properties, cashflow is king.
Henry Ford said if you sell to the masses you will live with the classes if you sell to the classes you will live with the masses. His point is that you get rich off of average people. This works no matter where you are. You should look for middle class blue collar people to rent to. Whatever the average is in your area is what you are looking for. There are people making money off of these good solid working people everywhere. Make sure you know how they make money off of them where you are and copy what they do. Copy copy, copy. Don’t ever figure it out yourself. You will probably find that the people making money are not buying $140k houses and renting them for $1k/month.
$6000 tax on a 140k property is broad day light Robbery!! Move out of that place as soon as possible!!
There is no way that is the norm, more than 4% per year?
As Keith said, these numbers based off 1k/month rent will kill you. That being said, you really need to narrow down that rent range. My guess is there’s nowhere near $1k/mo of cost range on this type of house. Look at it like a renter. Compare other houses to this one and ask yourself if you’d pay 2k/mo to live there. Would you pay $1500/mo? $1000? You have to nail down as many costs as you can so you can see if it’s a wise investment.
You mentioned cash for the offer. If you have 140k sitting somewhere, please do yourself a favor and evaluate this house and other opportunities before you go throw it down on this one not knowing the costs of what you’re getting into.
Losing your butt on your first deal will likely sour you from doing REI for awhile or forever.
There can’t be any guessing game with purchasing your first rental. You need to have every number to a tee. One number can be way off and it will skew your numbers maybe in the wrong direction.
As somebody already said, it is about cash flow and to get the right cash flow it is an exact science.
Find out for certain if there is a monthly fee for HOA and how much holding costs if not rented must be figured in. Good luck.