Good First Property?

[Daniel Dietz]

Hello,
We are on the verge of buying our first Investment Property, but have been thinking about it for quite a while. I do have a mentor in my uncle that has been a Landlord for about 5 years with 10 units. My day job is in construction design/sales specializing in kitchens and baths, so I could get that at cost and have a good list of subs to use too.

We are in a town of about 10K people with a good employment situation compared to the national picture. The property we are looking at is a foreclosure and listed right now at 49K. It is assessed at 92K and was first list at 79K about 2 months ago. The last drop took it from 59K down to 49K. it seems this is about the discount that things seem to get snatched up at around here.

It is a 4 bedroom 1 1/2 bath bungalow in a great older neighborhood that is mostly filled with excellently maintained houses in the 130K - 170K price range. It is considered a very desirable area of town to live in let alone rent in.

I know it needs some minor interior stuff; carpet, paint, maybe cabinets, and 1 bath needs some drywall and mechanicals. The outside is mostly maintenance free. Nice sized lot too for a family.

I am going to look at it this afternoon with our towns 'foreclosure specialist' Realtor.

How I see the finances is this; buy at 47K, but in up to 18K in improvements for a total of 60K invested. Payments look to be around $378 @ 20 years @ 5.5% (our local banks going rate on SF rentals), taxes and insurance of about $216 for a total fixed cost of $594. I am fairly confident that we could rent this house for at least $850 per month. Figuring 1 month empty per year, that would be a total income of $9350 - fixed cost of $7128 = $2222 cash flow.

I am looking at this as a wealth builder for retirement not as a current profit maker.

What do you all think of it in general?

Thanks, Dan Dietz