Must Sell! Turn-Key SFH $778 rental in Alabama 3/1/1,346 $48,880 13% Cap Rate!

[Thomas Malone]

I was going to keep this in my portfolio as long-term cash-flowing rental but a reorganization at my company has eliminated my position and I now need cash until I have settled into a new job.  The hard-money loan is coming due and I can't refinance into long-term bank financing without a job.  It seems my only exit is to sell and sell fast!

This solid, 1,346 sq. ft., 3 bed, 1 bath house was completely updated last Nov. Refinished real hard wood floors, 25-year Allure vinyl flooring added in kitchen and bath, all new plumbing, AC unit, all fixtures, faucets, interior paint, many more upgrades. Property management is in place. Tenant is approved for $778 monthly rent on section 8. Here's the MLS listing: Just renovated rental SFH at 13% Cap rate

Annually: $9,336 rents, $672 insurance, $836 taxes, $934 property mgmt, 13% cap rate!

Zestimate: $49,242, Estimated comps $57,375, Tax value: $59,100, Sale only $48,880

[Patrick L.]

Originally posted by @Thomas Malone:

Originally posted by @Patrick L.:

You missed vacancy, repairs, and capital reserves in your numbers. 

Hi @Patrick L.  Thanks for reading my post.  I did include 5% for repairs when calculating cap rate.  You are correct the other two numbers are missing.  No vacancy was calculated because it's leased section 8 but something bad could happen...  I am not opposed to conservative valuations.

 Just because there is a tenant today doesn't mean there will be a tenant every month that you own the property.  The standard is generally to figure 8% vacancy, which is one vacant/unpaid month per year.   Some years you have no months and others you might have to evict a tenant and end up with 3 months.  5% will not cover everything that breaks in the house.  That's $477 per year to cover your plumbing, electrical, paint, flooring, windows, doors, roof, HVAC, water heater, siding, appliances, etc.   I would budget around triple that between repairs and reserves.  

You've had this on MLS for 70 days including more than a month at this price. If it were a screaming deal someone would have already purchased it as every local buyer that's looking has already seen the MLS listing....