Would this cash flow well?

Question

I have a friend who is interested in real estate investing and currently looking at different properties in the Dove Pennsylvania area. He is currently renting and wants his landlord wants to sell. His landlord bought at the height of the market in 07' and wants $120k for the single family, 3 bed, 2 bathroom house. It needs an updated kitchen and some repairs. The average fixed up home in the market is selling for around that $120k mark or just above. My friends concern is that the asking the price doesn't justify the home because of the numbers. After the mortgage, cap ex, maintenance, planning for vacancy, and property management, all factors we've been using when running numbers on a property based off the information gathered here on BP, it would only cash flow $26 a month at a purchase price of $100k. However, the garage is rented out for $225 a month. It is a 2 car garage and it's current use is fixing vehicles. After that, it cash flows over $200. However, my friend's concern is if the garage being stops, could he rent it for just as much? What is the typical amount a garage is rented for? Would it be a good deal if it doesn't cashflow without the garage? Also, is there anyway to deal with a seller who has bought at the height of the market and is trying not to budge on the price too much?

Patrick Liska · Answer

You will need to purchase it for less. i was going to buy a SFH in PA that is a student rental, right next to one i own now, 4 bedrooms, $1500/m, asking 110k will not cash flow after Mortgage, i figured i would have to get it for 75k in order to have some cash flow. owner didn't take my offer and they decided to put it on the market, it's now been sitting there for 6 months, figure they will come back to me. so right off the bat i can tell you the numbers don't work, try and get it for less.

Taylor Chiu · Answer

I would stay away for me if you are not going to cash flow positive at least $100 or so. The only way I would get into a property that was pretty much break even is if there is a high appreciation play, but it does not sound like this market is doing that at the moment

Caleb Heimsoth · Answer

@Corwin Hernandez this isn’t a very good deal

Brian G. · Answer

@Corwin Hernandez

hit the @ sign then begin to type the name of the individual you want to tag and it will auto-populate their name then select when you see who you want to tag. Try it!

Thomas S. · Answer

The numbers do not work without the garage. The garage is not dependable income. Tell your friend it is a bad deal and he should pass.

Mike Flora · Answer

Yeah, this is not really a deal but if he is stuck on such a high price then tell him to carry the note for a while with low interest and low down payment. Put together some terms for him that will work for your friend. Otherwise just move on.

Dennis M. · Answer

This is no deal . No money in it for a rental

Corwin Hernandez · Answer

Yes the owner owns it free and clear along with a couple more rentals. That's what I told him because I dont believe it's a very good deal because the seller bought at the height of the market and wants as much as he paid for it. Also, could one of you tell me how to mention someone in a forum post here? I'm not sure how to do that, only reply to posts

Mike Flora · Answer

Does the owner own the property free and clear?

Corwin Hernandez · Answer

@Dennis M. The rent he pays is $900 but with the garage, altogether it is $1,125

Would this cash flow well?

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