Thinking about putting an offer down, looking for non-biased opinion...

This is a duplex, and it is currently being rented out as a single. The tenant wishes to stay and has lived there for 8 years.

Owner pays water

Price = $37,000
1432 sq feet
It is in a not so great part of town and the current tenant is paying $850/month.

This seems like a slam dunk to me. I have not gotten mortgage approval so my numbers are just estimates using online mortgage calculators…

Lets say a 100% mortgage is $234/month (assuming 6.5% interest)
property taxes = $31/month
Insurance = $25/month (may be a little high)
5% vacancy=$42
5% repairs=$42
10% management=$85

Cash flow = $391

I also want to note,

No upfront repairs are needed.

Would you be fine collecting the rent in person?

Yes, although I would drive a different car then my daily driver BMW. The street this house is on is not as bad although there was a homicide about 3 miles from this house last weekend.

why not have them write and mail a check to you instead? Then if they are overdue on their payment drop them a visit.

wow. where is this?

also the tax might increase after you buy it. whats the tax % rate
and which area are you in?

i heard most banks won’t lend under 75k in CA. don’t know about
your location.

why would you think that the tax would increase?

in many parts of the country, the tax is based off the purchase price, which is usually more than what the seller paid. hence the tax goes up.

Your #'s look ok. You show $85 for management fees. Will you have management? If not, that is all the more cash flow. If you DO use management I assume they will collect the rents for you.

Personally, we will only invest in good locations. The rule for us was, as long as I felt comfortable being there alone then it was good. You could also call the police department and see what logs they have for the area. We also did this and the property we were looking at happened to be one of the worst in the city and this is the city I live in. almost every city has good and poor areas so just be careful.

Just curious where you can get a property for $37,000? I live in So California and prices were that in the 1960’s!

Sure you can do that, but I always ask people who buy in “up and coming” neighborhoods that would they collect in person. Because if you are affraid to collect the rent, then you have no business being there. That is all. Whether you have a management company or you have them mail it to you, that is up to you. But you if are affraid to visit, than you will have greater problems in the future.

There are more areas than overpriced Californicator. You can find properties like these in the rust belt, generally the rust belt has had a negative population growth for the past 10 years at least.

It is a low income area; I wont drive up in a $55,000 car but I am not afraid to go there. It is on the west end of my city so the crime rates are going to be high. If you think $37,000 is cheap you should see the other homes in my city. There are 1200sq homes going for $17,500; there is a 675sq ft home on MLS that is $7,500.

There is so much cash flow potential in cheaper homes; I have to leave my emotions at the door and realize I am not the one living in the house. I have read too many fixer Jay books I guess (he preaches buying ugly houses).

As for the poster in California…I don’t know how anyone could live there. Even though people make more money out there; if I made 350k/year I don’t think I could live comfortably, it’s just not worth it! When a home costs at LEAST $300k how in the world can you make a living off of cash flow? It must be hell getting investment property loans.

Oh my dear yes you could live comfortably here. We have the ocean, mountains, rivers and not to mention great weather all year round.

It has never been a problem getting a loan on investment property. The first 4 plex we put only 5% down and were making a $1200 cash flow from the start! We are now making double that. AND, we paid $232,000 for that property 9 years ago and today it is worth about $800,000.

My concern with where you live (where do you live?) is reselling properties. My sister moved to Missouri 21 years ago. They bought a house that was on the market for 8 years! They paid $45,000 then and have it up for sale now at $79,000. They can’t sell it. It has been up for a year now. If you look at those numbers, with inflation and up keep, they have actually lost money.

This might be a problem with your area. Easy to invest but hard to resell. Every week we get offers from buyers wanting to buy our properties. One of our 4-plexes is in an association with 22 (4-plex) buildings. In the last couple months owners were asking $725,000 and it sold for $765,000! This property we bought on a short sale about 9 years ago for $220,000. See the fortunes being made here?

You have to buy where people WANT and NEED to live. It’s all based on the strength of the local economy.

hmmmm…no money down and $300+ per mn in cash flow…I’ll take it. Who the heck cares where it is and have a mgmt co. deal with it. As long as the place is some reasonable shape (i.e. not termite infested or in will need to be demolished in the next 10 yrs).

Just sign the loan docs and collect your $300/mn until the end of time.

I just got a preapproval from a traditional lender. . . I was told only 90% can be financed for investment purchases through this bank. This may sound stupid to be asking after the fact, but are there traditional banks that do 100% rentals/rehab loans? :-[
Might as well apply with them too while everyone is hitting my credit for the same purpose for the next 30 days. . .

Depending on your credit score, yes you can get a 100% LTV, NOO Investment Loan. what is your score…do you know?

710 EQ, 701 EXP, 715 TU

Yes, you can go 100% LTV NOO

It’s that kind of thinking that gets some people into trouble. $300 a month cash flow is only good if you can collect the rent.