My first potential deal

OK, here is some info on my first potential deal. My thoughts are to buy and rent this home for a year and then decide what to do with it.

Current documented appraised value of the home is $128K.

Selling price will be $108K and the seller will be paying a fair chunk of my closing costs.

I can rent this home for about $50to $100 a month over my expenses for PITI at a loan value of $102K + $14k second mortgage.

My thoughts are to take the $8k additional second mortgage cash as the “profit” in the deal and just let the rental money cover any additional expenses. My plan would be to reassess and possibly sell in a year.

Please let me know your thoughts, unless something really looks silly, I am going to pull the trigger on this one.

Also, my understanding is that the $8k I take would be tax free as it is a “loan”.

Thanks for any comments. Frankly, this forum and one other website is the only resource I have used to get to this point.



hi sounds like you have found a pretty good deal. Here is what I think.
102K 1st +14K 2nd = 116K mortgage - sales price 108K = approx 8K to buyer at closing.

Sounds pretty good to me. Sounds like you are almost going to pick up the property with no money down (100% financing) THAT IS GREAT BECAUSE OF OPM and then you are going to cashflow the deal 50 to 100 bucks…so its a performing assett (that’s the name of the game) and you get cash at close…man, you sound like a pro to me. If what you are saying is true, its sounds good so far. My advice to you then would be to figure out your exit strategy in case something doesn’t go as planned. If you are still ok, with possibly having to dump the prop or whatever else you come up with then go forward. Also, you said the market value is 128K so maybe you can consider doing a lease option raising the price to 140K (depends on your market) or so and maybe even raising your payments. Sounds like there is a lot you can do. If you have to dump it at 128K it sounds like you will still make a little money if you sell it yourself. I think you have all the bases covered. Sorry for my rambling. I hope this gives you a few more things to think of.

Good luck,


I would recommend that you try to get more than $50-100 cashflow over PITI for a rental property. With rentals, you also have vacancies, repairs and maintenence that you will have to pay out of the cashflow. Most of the time, rentals just go along paying their own way. Then all of a sudden, you have a property vacant for a month between tenants. You are going to have to come up with the PITI for that month as well as the fix up costs. Then maybe the hot water heater goes out and there is another $500 down the drain. How deep are your pockets. Can you afford to come up with this money yourself? The older the propety, the more maintenence you are going to have. I’m not trying to burst your bubble, just want you go into this with your eyes open so that you don’t get in trouble.


These are great points by Wilson. Take the 8k you will make at closing and put at least 3-6 months worth of mortgage payments into an account to cover the vacancies and then take your cashflow from the prop to reinforce that account for maintenance. That is one way to protect yourself. Great points by Wilson.


Thank you for the excellent replies.

I am going to take your advice and put away 3 months of PITI in order to have a cushion.

That has only a small impact on my overall cash in hand and will provide me some peace of mind.



OH oh oh, and also get a home warranty plan (paid by the seller) and that will help you with maintenance issues too! Trust me, they are GREAT and cheap too. Better to have it and not need it than need it and not have it.


That is an excellent idea. Thanks very much. I have been a little worried about having stuff break, but the warranty idea is right on.