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Updated over 7 years ago on . Most recent reply
Unproven rental history/
Hello,
We recently went under contract on our first investment property. There are several issues I'm concerned with.
1) The property has not been rented in several years so there is no rental history.
2) The duplex was recently sided and cleaned up on the inside but upon inspection has some foundation and structural issues.
3) The neighbors sump pump is bumping "waste water" out of their basement and it runs down onto the duplex's driveway. The town says "waste water" but it smells like sewage and is grey in color.
4) Our Cash on Cash is a negative number but we are above 1% for the 1% rule.
Here is our plan:
1) we are confident in the area and can conservatively ask 2400 a month for both units. We think this is comparable to the neighborhood but the apartments are nice so we think we will be getting good tenants. We plan on raising rent yearly once we have established an income history.
2) We are getting bids on the work to be done. I'm expecting the work to be approximately 15K. We are going to ask that the seller absorb the cost of this work as it was not disclosed.
3) We are going ask the neighbor's "waste water" situation be fixed before we close with some sort of proof like pictures of the repair.
4) See my numbers below.
Does all this make sense? Am I doing this right? Can anyone share some experiences with me that are relevant? I feel a little lost.
| Purchasing Price | |||
| House Price: | $219,000.00 | 1% rule | 1.03% |
| Immediate repairs: | $15,000.00 | Cash-on-cash | -2.71% |
| 25% Down Payment: | $54,750.00 | ||
| Equity Line | $52,000.00 | ||
| Cash | $8,072.18 | ||
| Inspection Cost | $770.00 | ||
| closing Costs | $5,322.18 | ||
| Need at closing | $60,072.18 | ||
| Estimated Income | |||
| 1st Floor 1 Bedroom | $1,100.00 | ||
| 2nd Floor 2 bedroom | $1,300.00 | ||
| Total= | $2,400.00 | ||
| Expenses | |||
| Principle and Interest | -$942.13 | ||
| Taxes | -$290.83 | ||
| Insurance | -$150.00 | ||
| Water | -$40.00 | ||
| Trash | -$40.00 | ||
| 14 Love Lane Equity Loan | -$430.00 | ||
| Reserves | |||
| Capital Expenditures reserve (8%) | -$192.00 | ||
| Vacancy Rate (8.3%) | -$199.20 | ||
| Snow removal (2%) | -$48.00 | ||
| Repairs (5%) | -$120.00 | ||
| Income from Property: | -$52.16 |
Hank