Would this be a good investment?

Question

Hi guys I'm studying for my first investment which I'd like to initiate this year possibly after summer?
	
	Would this be a good house to buy n hold?
	Why or why not?

http://www.zillow.com/homedetails/2954-Westmoreland-Ct-New-Port-Richey-FL-34655/46416377_zpid/

My objective here is to really start training myself to understand the market.

Christine Glasner · Answer

Account Closed It looks in good condition.  Would you be paying cash or getting a loan?  Do you know the going rental rates for the area?  It looks occupied, so you might have to deal with evicting prior owners. Sometimes people will damage a house before the leave, so you might want to have some money ready in case that happens.

Just a few things to consider when evaluating a property.  I'm sure others will add more insight.

Best of Luck!

Aaron Montague · Answer

Account Closed

Now that it looks like a good deal, it is time to find out if it actually is.  Make sure you vet each number associated with the deal.

Just because a number looks awesome, doesn't mean it isn't.  But make absolutely sure you can get comparable numbers for your deal.  And do it fast.  Good opportunities do not hang around.

To @Jean Bolger 's point, just because a number was XXX last year, doesn't mean it will be the same this year.  Things happen all the time in towns and cities that can really screw up rentals.  Get in touch with the agent in charge and make sure they numbers presented are accurate for 2013 AND going forward in 2014/2015.

Account Closed · Answer

Thank you both! @Michael Olesky and wow @Aaron Montague  that's what I really need to learn how to run all those number like you to come to a conclusion

Account Closed · Answer

Hey thanks @Christine Glasner I would be getting a loan and idk the going rental rates that is what I'm trying to figure out now.

George P. · Answer

depends.

Jean Bolger · Answer

Be SURE to get your own insurance quote(s) for anything that could potentially be in a flood zone... and that covers an awful lot of stuff in Florida. Things have gotten really shaken up in the insurance market, and just because the current insurance is reasonable doesn't mean you will get anywhere near the same price as a new owner.

Aaron Montague · Answer

Ah, I should have hit the street view button earlier...

To @Michael Olesky 's point... there may be an HOA fee and/or HOA restrictions on the property.  Or it may be an attached house.  Those are important details.

Aaron Montague · Answer

I'll go with "probably."  If the place is in good shape, and rents for $710 or more, it would meet my minimums for a SFH rental($150/month cash flow and 15% Cash on Cash return).

It seems that $710 is a reasonable rent for the area:

2+ Beds in the Port Richey Area

Rentometer - remember that these are apartments only

I see your monthly expenses as the following.  The returns are against $750/month for rent.

Mortgage Rate 4.75%

Length of Mortgage in years 30

Monthly Mortgage payment $156.49

Taxes $25.00

Sewer and Water $-

Trash $-

Heat/Utilities $-

HOA $-

Cap Ex and Ops $150.00 (this is my minimum/roof/month)

Insurance $50.00

Mgmt Fee $75.00 (10%)

Vacancy $60.00 (8% or 1 vacant month/year)

Total Expenses $516.49

Cashflow/month $233.51

Cashflow/year $2,802.07

Cash on Cash Return 18.08%

Michael Olesky · Answer

Hey Jacob,

My first thought is that this is an apartment, not a house.  I avoid apt's but I'm sure someone who favors them will post their opinion soon.  I avoid apt's because you'll have a monthly HOA fee to pay in addition to your normal mortgage/owning costs.  My experience with HOA fees was that they kept increasing year after year, I didn't notice it that much the years that the rent went up as well but then rents dropped.  I noticed it big time that year because the HOA still went up.  The reason this doesn't sit well with me is that I don't have control over my cash flow, every property is subject to the affects of rent dropping, but I see no need to add an increasing HOA fee to that equation.

Additionally, you have no control over how your neighbor lives, for instance, roaches in your neighbors apt means roaches will find your apt as well.

The other concern I have for apt's is there are usually only a few different models and you are limited in the upgrades you can do to increase the value of your apt over someone else's.

So that is my personal experience/opinion on apt's, the other thing I am currently avoiding is short sales, which this is, because of the long time period to get an offer accepted and closed.  Again, a personal preference you'll want to decide for yourself.

The best of luck and keep us posted!

-mike

Would this be a good investment?

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