First Post, would you consider this a great deal?

Question

This is my first post... I’m buying a property close to my office. It’s 3/2/2 at 1288 sq feet. Partially updated with new carpet and paint throughout... needs $3-5k in work, including hot water tank, fence, and some fans replaced, he’d sprucing. Home has new HVAC within 2 years, recent foundation fixed. It’s on a cul de sac. With my work I feel like it’s worth $135k, I’m buying for $113k. Plan to buy and hold for at least a couple years and rent at $1150/month. Is this worth it to you?

Alyssa Dyer · Answer

Since it's in Edmond I think it's a good little find. It's not a home run, but you have good equity and it should appreciate. I'd do it if you were able to do it with a commercial loan and could do less down because of the equity position.

Rhett Tullis · Answer

that is about as low as you will find a place in edmond right now.  while rents may not be a great thing on it, it should appreciate and will certainly rent quickly if fixed up well.

Jaysen Medhurst · Answer

@Daryn Rody, maybe at $113k. You're not even hitting the 1% rule at purchase price, let alone ARV. At $90-100k, it looks better. My math has you cash flowing ~$200/month, which isn't bad. Your ROI is <8%. That's not nearly good enough for me.

A few questions/things to keep in mind:

• Your reno budget looks low. Do you have bids?
• You "feel" it's worth $135k. You can't determine an ARV by feel. Have your agent pull some comps and give their opinion. Overestimating ARV and underestimating reno (see above) are the 2 fastest way to get yourself in trouble.
• You wrote "3/2/2." So, 3 bed, 2 bath, 2...what? 2-car garage? I've never see it written this way.
• I'd really like to see full underwriting of his rental. It could be a very tight deal.

Joe Splitrock · Answer

@Daryn Rody for a single family home on a cul de sac, $1150 rent on $115K purchase price is good, even though it falls short of 1%. The loan terms are not great. I just locked in on a 30 year fixed for under 6%. The insurance seems about double what I would expect for a policy without personal property included.

As a realtor who has acquired 8 properties, I would completely trust your judgement as to location and valuation. Not your first rodeo, so I say go for it.

Cassi Justiz · Answer

It seems like a good purchase price for Edmond, but I don't know that I would consider it a "great" deal just looking at it from a pure rental perspective. $113k a great price for Edmond, but Edmond is generally not known for the high return rates. How good of a deal is is will really just depend on what your goals are. As long as you don't have an HOA and your rent numbers are stable it should cash flow even on the 20 year note.

Paul Sandhu · Answer

It's not worth it to me, but my rentals are STRs.  If that house you are considering buying was a STR, you could probably get $1150/week for it.  It would take 102 weeks of gross rent for the house to pay for itself.  That's too long in my books.  I shoot for 26 weeks.

Jason D. · Answer

@Daryn Rody at that rate and term, I wouldnt do the deal, unless there is a very high probability of appreciation.

At 30 year amortization I would probably do the deal. And I would shop for a longer fixed period. You should have no problem finding a 5/1 or 7/1 30 year amortization at 6.5%. The longer term would just give you a little more flexibility.

Pete Bhanshali · Answer

Daryn,

In my opinion it's not a bad deal, your approx Mortgage including interest, principal, taxes and insurance will be around around 724 at 6% interest. Is there a reason why you are not going for 30 yr fixed mortgage, right now rates are pretty good? If this will be self managed then you will net about 426 a month, not a bad return. I would have to disagree with other posters on being not realistic on your reno budget. The budget is in line with what I pay for repairs on my properties.

pete...

Daryn Rody · Answer

All, this is awesome. thanks so much for your response.  this property is in Edmond, OK - a suburban of Oklahoma City.  The insurance is $957/year, the property taxes are $1223/year.

I am doing 20% down on a 3 year fixed rate, 20 year Amortization at approx 6.5%

and yes, Jaysen, it's a 2 car garage on a cul-de-sac

I am also a realtor, this is my 8th property...  The home is one of the smaller and lower priced ones in the area, most of them range from $120-150k.

The $3-5k rehab is for the hot water tank ($800), fence ($2,000) and yard/small cosmetics ~$1000-1500....

Taylor Roeling · Answer

@Daryn Rody Welcome to Bigger Pockets! I am curious to know where this property is. Don't forget there are lots of free landlord resources out there to help you manage tenants and such - on BP click on the tools tab, then under services click landlord resources: https://www.biggerpockets.com/tools/landlord-resources! Best of luck with your property.

First Post, would you consider this a great deal?

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