What numbers do you need when looking at buying a house?

[Chris C]

I am new to this and wanting to buy my first rental house, there is a foreclosed house close to me that is in a great location within walking distance to most places, similar houses rent for 750-800 a month the house i looked at is 60,000 i looked at the last time this house sold which was in 2006 for 131,300 its a 3bd 1 ba with a .35 acre lot (which is big for being right in town) i figured that i wont need to put more then 15,000 into it, So does this sound like a good deal? What other numbers do i need to look at? What type of offer would you put in on it? thanks

[Will Barnard]

If you were to use the 50% rule on tis deal, assuming the $800 in rents, that means that your operating expenses will be $400 per month and therefore your NOI (net operating income) will be $400 monthly. Since you should want at least $100 cash flow per month, that only leaves you $300 monthly for the debt financing.
At 7%, $300 monthly only allows for a max purchase price of approx. $50,000 and that includes any repairs + acquisition cost.

So the answer to your question of $60k purchase + $15k repairs = NO, bad deal.

$35k purchase + $15k repairs = YES, good deal.