Question on a property

[Peter Mckernan]

Hello everyone,

I have a question on a property that I am looking to buy with a partner and wanted help getting off the fence, and saying yes or no to the counter. We found a house in a good area, with good schools, no repair at all, new flooring, new carpets, new paint, good curb appeal, and an all around very nice house for a rental.

I ran the numbers with 20% down and the underwriter given us 5% for an investment property. The house had been on the market for over three months, went from $315,000 down to $299,000; and just yesterday we saw it drop to $279,900. The house was of course over priced, so we threw an offer in at $275,000 and they came back with a counter at $279,900 and said they can't go any lower. The cash on cash return would be 3% if we rented the house out in the mid range price for the area, and the cap rate is 6%. The cash flow is showing $160.00 a month. We are also keeping in mind that the rental prices can stay where they are, go down, or go up. This all in mind is it going to cash flow, or "Bleed Money."

I know these numbers are on the lower end and aren't the best; however, I also didn't plug in the highest amount we could get for the rental a month. I know that we should err on the side of caution; however, I need some help for the peace of mind that we made the right decision.

Thanks!

Peter