Hello,
I think I’ve found a good deal in California (the San Francisco Bay Area). The top floor is a 3 bedroom 1.5 bathroom with views, and the bottom floor is gutted. This could be made easily into one big house or two separate units. The house is going for $440K, with only 17 houses on the market in this small town…there are only 2 properties that are going for less (the lowest is 399K, at 900 sqft, 2bd/1ba).
Do you think this is worth looking into? As a buy and hold rental property? I have a friend that wants to do it and will pull $100k out of his house as a down payment that we would both make payments on to pay back. Then we’d split the mortgage payments obviously. We think after rehabbing the bottom floor we could get about $1300 for each unit per month. Oh, and the top floor is about 1400 sqft, downstairs is 1200 sqft.
Any thoughts?? I’m obviously a newbie to investing…
Thanks!
Well Im not sure what your looking for but cashflow would not be in your equation here I dont think.It sounds like it has nice features but
$440,000 @ 7%=$ 2,927.33 a Month p&i
$100,000 @ 7%=$ 665.30 a Month
assuming the $100,000 will cover rehab and closing and misc. start up fees your initial monthly expense is
$3592.63
+Tax
+insurance
+vacancy rate
+ maintnance
only bringing in $2600 in rent :-[ Im not feeling it.
Thanks for the great info!
So, do you think it would be worth it to fix it up and sell it? Taking into consideration that right now, it’s basically a 3 bd/1.5 bath at 1400 sqft…and has the potential for another unit downstairs…and even possibly another unit in the basement (cement would have to be poured). The closest comp is another house that is 1500 sq ft 2bd/1ba for $464K. There is also a 3 unit place that is selling for $815K out of the only 17 other properties in the town.
The other factor I didn’t mention is that this house is pretty close to a rail road line, a C&H sugar factory, and is zoned commercial.
Wow, maybe I just talked myself out of it…??
Andreajade,
This property is what the REI folks call an “alligator”. IT will eat out of your wallet every month.
IMO, you’re going to have a heck of a time finding a property that will cashflow in the bay area.
Keith
I’m new too, but I’ve read a lot and talked to a lot of seasoned investors. The first thing they told me about renting is the 1/100 rule. That is to use 1/100 of the purchase price as your baseline to start your figuring. In your case then you need to be pulling in around $4,400 / month.
Jeff
Thanks, that’s a good way to easily identify a good buy. But what if you have 10-20% down? Do you use that figure for the original price or after the down payment?
And also, what do you think about just buying it to fix up? I think it might cost around $50K. Good idea or should we just keep looking (outside of CA!)?
The way it was explained to me was that the original purchase price was the baseline regardless of how much you have down.
Jeff
Jeff is correct because if you put money down to create cashflow, you’ve created it artifically and have lost the use of the money. There is a cost involved with consuming your capital completely!
Keith
It may be a true deal but when you get into mortgages of $440,000 your looking at serious holding costs you need to be prepaired to digest until it does sell.And is the bank going to lend you $440,000 on a vacant property with only 10% down ?