Sounds good but is it a good deal?

Buying & Selling Real Estate
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Sounds good but is it a good deal?

David Hollenberger
Rental Property Investor · Pittsburgh, PA · Member since 2018 · 17 posts · 5 votes
I am brand new to Investing and this would be my first potential deal. This house is right next door to my current home and the owner hasn't lived there for 3-4 years. (Lives with her boyfriend) She keeps it maintained and is in good condition. She has the home paid off and has mentioned about wanting to sell before. I want to cash flow this property eIther by lease wIth the ootIon to buy or Long term rent. My deal is as followed: I would ask to do sellers finance so I could avoid a bank or loan at all. Offer price - $125k Repairs - $10k Mortgage/Tax/Ins. - $675 RAV - at least $160k Rent - $1400/m Prices are very reasonable for my area. Let me know what you think. Thanks!
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  • Doug Shapiro
    Real Estate Broker · New York, NY · Member since 2014 · 140 posts · 58 votes
    8y

    Hi @David Hollenberger,

    Use one of the BP calculators to get a better idea with ALL costs. You need to factor in vacancy, maintenance, CapEx, and other costs.

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  • Hardik Patel
    Rental Property Investor · Lancaster, PA · Member since 2018 · 5 posts · 0 votes
    8y
    @David Hollenberger.. after accounting for Cap ex, maintance n vacancy of total 20% of Rent.. deals seems to make sense with Cap Rate at about 8%. However, I concern about ROI. How mush Down Pay In the Deal. Assuming 20%. Deal would make more sense if you would refinance after rehab for 70% LTV for 160k. For ROI. Otherwise.. ROI is not good to buy the prop.
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  • David Hollenberger
    OP
    Rental Property Investor · Pittsburgh, PA · Member since 2018 · 17 posts · 5 votes
    8y
    @Hardik Patel Thank you for your response. I did run this property through a calc however not the BP calc yet. Return (IRR): 47.78% per year Total Profit when Sold: $78,918.59 Cash on Cash Return: 553.81% Purchase Capitalization Rate: 8.45% Monthly Annual Income $1,400.00 $16,800.00 Mortgage Pay: $457.40 $5,488.85 Vacancy (5%): $70.00 $840.00 Property Tax: $125.00 $1,500.00 Total Insurance: $91.67 $1,100 Maintenance Cost: $100.00 $1,200.00 Other Cost: $133.33 $1,600.00 Cash Flow: $422.60 $5,071.15 Net Operating Income (NOI): $880.00 $10,560.00
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  • David Hollenberger
    OP
    Rental Property Investor · Pittsburgh, PA · Member since 2018 · 17 posts · 5 votes
    8y
    @Doug Shapiro Thanks for your response. This is what i figured out but im not sure if Im missing anything or if something seems off. Return (IRR): 47.78% per year Total Profit when Sold: $78,918.59 Cash on Cash Return: 553.81% Purchase Capitalization Rate: 8.45% Monthly Annual Income $1,400.00 $16,800.00 Mortgage Pay: $457.40 $5,488.85 Vacancy (5%): $70.00 $840.00 Property Tax: $125.00 $1,500.00 Total Insurance: $91.67 $1,100 Maintenance Cost: $100.00 $1,200.00 Other Cost: $133.33 $1,600.00 Cash Flow: $422.60 $5,071.15 Net Operating Income (NOI): $880.00 $10,560.00
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