Help! : First Time Investment Property Purchase Advice

[Tyler Lushbaugh]

Hello everyone,

I'm looking to purchase my first investment property in my home town so I need to run it by you all to make sure I'm making a decision with my brain and not my heart. 1910 SFH in highly desirable school district, bank owned $99,000 asking price. It needs max $20,000 in repair, has a new furnace, new water heater, foundation is solid, .2 acres just needs paint and carpet removed. I have a buyers agent telling me that fair market retail is around $160-165K. I'd like to BRRR the property and rent it for $1100/mo. Since I don't have the cash to make the deal work I'm planning on going with a hard money lender at these terms:

Loan: 12 Months 3.5 Points at 10%

Purchase Price: $99,000.00

Renovation Price: $15,000.00

Total (Purchase + Reno) $114,000.00

3% Closing Cost: $2,970.00 (Estimate)

Insurance: $900.00 (Estimate)

Lawyer Fee: $1,000.00 (He reviews all closing docs and title company docs to make sure they do not include any aggressive verbiage or title exemptions that would be a risk to your and our benefit)

Appraisal Fee: $450.00

3.5 Points: $3,192.00

Proposed Loan: $91,200.00

Released $76,200.00 ($15,000.00 Release for construction)

Buyer Brings: $31,312.00 (Estimate)

Downpayment $22,800.00

Is this really a deal? Will banks budge much on price? Am I just trying too hard?

Any thoughts would be a great help to me!

Best Regards,

Tyler

[Chris Pohlson]

@Tyler Lushbaugh  Here are some thoughts:

You say $20,000 max for rehab but budget $15k?  Is that just to make the numbers work?  I assume you're solid on that number?  

Just looking a the big buy and hold numbers: all in for $120k and rent is $1100 a month?  I can't make those numbers work.  

If you put away 5% of gross rents for maintenance, 5% for capex, 1 month rent for vacancy, then we need to know what taxes are.  Let's say they're $2,000.

If you were to refi all $120k on a 30 year note at 5%, your monthly cash flow would be about $10/mo after expenditures.  That's if everything went exactly the way you want.  I'm yet to find a deal that goes exactly as planned-sometimes for the better, sometimes for the worse :)

Now if you're ok with leaving some money in the deal, it might work. For a true BRRRR, I'd pass.