Passed on a property - Did we do the right thing?

[Chris Palmer]

We had put in a cash offer on a house in Gainesville, TX. The listing price was $99k, we offered $95k. The bright side of the property was there was two potential rental income sources. There was a main house built in 1920 which was a 2 bd 1 bath 1400 sq ft home. Comps in the area were very favorable, but the house was in very poor condition. Thanks to some good advice we got of the forum we estimated that improvement costs would have been around $50k on the main house and around $21k on the smaller cottage. Rental comps were in the neighborhood of $700 and $400 for a total of $1100 / month. When we ran the spreadsheet numbers we weren’t getting but 3% return on the cash put into the house.
That of course was if it stayed rented.

My question was did we make the right call? What would have been a price point in the property which would make sense? Is there a calculator for that?

[Michael Lee]

Hello and welcome to BP!  I found BP about 19 months ago when I was still medically recovering.  I am now 60 years old and I am quite opinionated.  I am still recovering and cannot walk and that mat have a bunch to do with my opinion.  This is a great place in real estate investing. I typically read two books per week and learn from YouTube too. I study/learn about 10 hours a day (7 days per week).  so I do know what I am saying.  The bulk of my experienced in construction developing and a little bit in real estate.

Math analysis and looking at your prospective properties need to be done before making an offer or have a clause in the salas contact that allows you the time (usually 10 to 15 days) to make a detailed inspection and possibly back out of the subject property without a penalty that will hurt you too much.  Learn how to just walk away and look at a new deal.  Stay in control of everything you are responsible for.  Do not trust anybody you do not know very well.  Track everything you are responsible for and review that regularly look at them in an effort to reduce expenses and possibly increase your income.

In the begining, just do what is average for that subject neighberhood. Hire out as much as you can afford even when it is a part time employment. Do what you can to keep you income productive. You sound like you are fairly knowledgable as a beginning investment investor. I did not see your turn down property question. So I will tell you about beginning investments. One thing you might want to do before starting is forming some type of corporation or a LLC to keep your personal stuff safe. You might need to hire an attorney and/or a CPA to advise you on how to form.

Another thing you might want to do before starting with investing is to get your financing figured out.  Make sure after you have made your first selection of a niche before you get your formation and financing selected.  The loan letter should contain the average loan closing time and the maximum amount you qualified for.  Another thing you might consider is your office location that is convenient and has minimal distractions.  You could locate it in your living place as long you can close it off easily and have minimal distractions.  Prepare for the unknown future in case something bad happens.

I live in Dallas County Texas and never have been east of the Mississippi River so I cannot give you geographical recommendations.  I was born and raised in the city of Dallas Texas. The bulk of my experience has been in construction management.  I have functioned in many different ways and could help you with many different ways if you can think of anyway I could do that.  Just contact me through BP at anytime.  I am usually on that every day while I am recovering.

Good luck to you!