Am I been realistic

[Erika G.]

Hi all. I'm new to this forum and want to hear your expertise. We are trying to buy our first investment deal and we're looking at a SFH in South Florida. This was a flip that sold in April 2013 for $183K, the investors have completely renovated the house they've installed new A/C, new flooring, stainless steel appliances, granite counter, and updated bathrooms.Anyhow, the house has been on the market since Jan 2015 starting at 320K and now it's at 279K. We're looking to buy this house as a rental and according to our realtor when he looked at the comps he said that we should offer 265K.

I was thinking on offering 250K. Does this sound reasonable or is it something that we might not even hear back from the seller since they might think it's low. The house is currently vacant so I know that they want to sell it and it's been on the market for 6 months now. Thank you.

[Randy E.]

@Erika G.,

Financing $250K to generate a gross of $2000/month seems a little risky.  The big risk is a prolonged vacancy combined with unexpected expenses.  

For instance, how would you fare financially if you discovered tree roots had compromised the sewer line (~$3500 repair) and soon after your tenants stopped paying rent and by the time you evicted them and got new tenants in you endured four months of no rent payments coming in?  

If you have the cash reserves and/or high income to absorb such a loss, you're ready to go.  If such a scenario would put you on the brink of missing mortgage payments, it's time to rethink your plans.