What do you think of this deal?

Question

Hey guys- first original post to the community, there’s a ton of great information on here and I thank all of you for your input and knowledge sharing!

I’m looking at a property built in 2016, current tenant is paying 1950/month.  I can purchase for $230k, put 25% down for a mortgage of approximately $1250 for 30 years. It’s a 4/3 2000 sq ft in an up and coming area. The original owners purchased it for $180k in 2016.

The deal seems like a no brainer to me, I’m just a little concerned about talks of a correction and that it’s increased over 25% in 2 years.  What do you think?  Thanks for the input!!

John Thedford · Answer

The experts say you make your money when you buy. How much of a discount is debatable. I would not personally buy this deal there is not enough of a discount. When the market changes you may find yourself underwater.

Laura Kayes · Answer

Hi @Thomas O.

I'd be a little curious as to why the current owners are selling. If they purchased at $180k, and receive $1950/month in rents, that is over a 1% rent rate. That isn't easy to find.

Make sure to factor in all of the expenses. $1950(rental income) -$1250 mortgage

-Insurance

-HOA fees (if there are any)

-Vacancy

-Repairs

-Home Warranty Company (if applicable)

-PM company fees (if applicable)

-Any utilities paid by you (if applicable)

-Taxes

ECT.

Good luck!

Caleb Heimsoth · Answer

@Thomas O.  Not even meeting the 1 percent rule.  Hard pass for me.  Some people might deal with this but I wouldn’t

John Thedford · Answer

you need to be purchasing at a discount from fair market value

Thomas O. · Answer

@John Thedford thanks for the feedback. I think I can get $5k off the price, but does the price really matter if the cash flow makes sense? For my RE investments, I have always bought and held.

What do you think of this deal?

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