How can I make these numbers work?

[Simen Gundersen]

Hi, i'm a non us resident looking to acquire a SFH in Memphis this year. It'll be with a Memphis turnkey company and purchase price is roughly $100,000. The turnkey company offers 50% financing via one of their lenders and I have been offered 10% interest, 3p and amortized over 15 years.

The numbers of a average deal they got is:

Rent: 925
Annual taxes: 847
Anual Insurance:  455
Property management (via the TK company): 10%

The property will be fully rehabbed, however, with the financing provided I am just not able to make any numbers work. When I account for 10% vacancy, 10% repairs and maintenance, 10% CapEx and the numbers above I end up losing money every month.

And I know I could argue that I don't need to account for capex/repairs and maintenance as it's completely rehabbed, but I have the understanding that the deal should cashflow anyways with that accounted for. In 10 years it's going to be as any regular house aswell and it needs to support that I feel like.

Any creative tips on how I could make a deal like this work? I am prepared to have to make a sizeable downpayment/pay higher rates, but i'm having a hard time making this work as of now....

Any help is appreciated, big thanks

[Ben Leybovich]

I think you are going about this all wrong. A good deal can be made better by a financing package, this is true. But, a bad deal cannot be fixed through financing.

With that said, while you are focusing no financing, I'd like to know in what universe it makes sense to spend $100,000 for $925/month of rent...?

There are 3 ways to create returns on rentals: buy with equity in place, benefit from appreciation, and cash flow. I am pretty sure that you are talking about paying $100,000 which is worth $100,000 - perhaps less, so no in-place equity. The CF will not be there in the amount you could be happy with unless rent can be $1,600. This leaves appreciation, and since we're talking Memphis I'd guess not. 

So - why buy?