Question about potential investment property

[Darren Wendroff]

Hi all, I'm thinking of purchasing a property in Orlando, it's in a poor neighborhood, but it's not bad and getting better. It's a 2/1 house, in good shape, 1000 sq feet, nice layout, nice yard. It currently has a good rentor who $700/mo on time and in a contractor who fixes things that break in the house. I could also rent the property for $800. 

The asking price of the home was $59k, and we negotiated for $52k cash, I'm wondering if this is a good investment. In Orlando, this property has the potential to rise to $65k in a year, and I can raise rents to $800 in a year also. 

But it's a cash offer, wonder if I'm paying too much or if the ROI isn't strong enough. Thoughts?

[Andre P.]

You'll only know that by running the numbers to check.

If you're paying 52k cash, what are your other expenses (since you wouldn't have a mortgage obviously)? After taxes, repairs, potential vacancies, etc, subtract that from your rent and you'll have your monthly cash flow.

Multiply your cash flow by 12 and divide it by your purchase price to get your rate of return- is it any good?

Without the ability and knowledge to understand the numbers investing in real estate quickly turns to speculating...