Please critique my 1st deal

[Ron Robin]

Closing in a few days and getting little nervous.
All cash deal, mainly looking for cash flow because I no longer can work a full time job for reasons I won't go into.

The house has a new roof (about 3 years old) and a new a/c and heater(3 years old) and will have a new hot water system. We will also be redoing the bath and floors in kitchen and living room.

Paying 50k and rehabing for 5k. 3br /1bath
Rents for about 950. taxes and insurance, and flood will run about 200 per month.

Two comps in the neighborhood, Asking 91k and 115k.
Only two rentals in the Neighborhood is a run down 2 br/1 bath double that they are asking 800$ and a Three 3br/1bath for 1000$

[J Scott]

Originally posted by Dale Osborn:

The whole purpose of investing in real estate is to leverage your money.

There are LOTS of reasons to invest in real estate, and to believe that only through leverage can someone reach their financial goals is very naive.

While many of us need leverage to meet our goals, there are plenty of investors out there who have financial goals where leverage not only isn't needed, but would be prohibitive to meeting their goals. I know a couple rehabbers who don't use leverage, and who do very well for themselves. I also know several long-term buy and hold investor who have retired on the cash-flow they generate from their free-and-clear assets who also hate the idea of leverage.

There is no one-size-fits-all real estate strategy, and depending on your goals, time horizon, risk aversion, etc, leverage may or may not be for you.

Paying all cash then having to do repairs for a gross rent of $950/mo does not seem to be the "highest and best use" of your funds.

Assuming NOI of 50% of gross rents, cash-on-cash return for this deal would be about 10%. For someone looking for a relatively passive income stream, who doesn't have strong credit, who doesn't want to leverage and who has plenty of cash to invest, 10% is a pretty healthy return. Just ask anyone with cash sitting in a money market, CD or the stock market these days.