What do you think of this deal?

it’s a condo for $39,999 1bedroom 1bath. taxes is about $175 a month.

It has a tenant who wants to stay who is renting for 650 a month including utilities.

mortage payment would be ~$245
taxes ~$175
total = $420

650-420 = $230 approximate cashflow.

bad deal?

Personally, I would need to see more information. First, what are the rental comps of the area? If this tenant moves out in 6 months, will you be able to get another tenant in the unit at the same price? Is it a good neighborhood. Are there a lot of other rental units in the area, or are they owner occupied? How long to rentals tend to stay on the market there? How many for ren/lease signs do you see in the area? Also, don’t forget your insurance costs along with the P&I and taxes. Is there any deferred maintenance? What are the comparable sales in the area? Would you be able to sell it for the same price or higher should you have the need to sell it within a year? Have you had it inspected? (I know, sounds like a plug doesn’t it? :wink:

Just some questions off the top of my head that I can think of. Hope it helps.

Lee Warren

thanks for the response. i didn’t think about all of those questions. One thing that stood out is that the current tenant is one a 3 year lease. I have to find out how long the tenant has left. The tax rate is high 4.7. The rents go for 500-700 in the area. It’s an ok area. Alot of rentals. mostly apartments. I’ll have to investigate further. thanks for the input.

You haven’t taken all of the expenses into account, so thus have a skewed “cashflow” analysis, e.g., how much will the following cost you:

  • Insurance
  • Vacancy
  • Advertising
  • Maintenance
  • Management
  • Condo Fees

I’m gonna bet that your cashflow is something more like $100 - 150 a month when you do the “real math”…

Additiionally, you need to find out if there are any “special assessments” loomng. A condo board can decide, often by a majority vote of the condo board, that something needs replacing and charge a special assessment to pay for it…

New investors: Cash flow is not (Rent minus mortgage payment)…cashflow is (Total income minus Total Expenses)!!!


Thanks Keith,

Is the insurance you’re talking about home owner’s insurance? Or are there any other insurance I have to worry about.

What percentage of rent do u use towards maintenance? I figure 1 bed 1 bath should not be that bad.

The “special assessments” is something i never thought about. I will look into it.

What is your minimum cashflow for deals like this? thanks again

Insurance would be any kind of insurance to protect your property…ever condo is a bit different as to what you own vs. what “shared space”. Make sure you know and insure accordingly…certainly, with a renter in place, though you need liability insurance, insurace for the inside space, and and insurance for any items that you own (appliances? major mechanicals?)

$15-30 a month for maintenance is probably more than adequate.

I don’t own any condos but I won’t even look at a deal with less than $125 a month ($1500 a year) of REAL cashflow.