Real Estate Agent · Saint Petersburg, FL · Member since 2017 · 37 posts · 26 votes
Hello everyone,
I just want some feedback from some fellow investors in the Florida real estate market. I live in Saint Petersburg, FL, but I often do business in Tampa. Hillsborough and Pinellas county are my main focus.
I am wondering what everyone thinks about a buy and hold investment that is for sale currently bringing in 1750/month and the sale price is 89k. The owner does pay all utilities, but even so it is an above average cap. The only catch is that 89k is about 15k over what the property would sell for if it was rehabbed and in good condition.
Is this a bad investment?
It is not in bad condition what-so-ever and the current tenants are repainting and putting in a better kitchen.
Minneapolis, MN · Member since 2017 · 353 posts · 223 votes
8y
That is a lot of rent for that price point. Why would you overpay for that house when you could buy a nicer rehabbed property for less. That makes no sense.
Just buy another property and find your own renter if it is the case.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
8y
@Ryan Fitzhugh "the current tenants are repainting and putting in a better kitchen"? The current tenants? Like the renters themselves are coming out-of-pocket to put in a better kitchen? Tenants wanting to wait a room a different color isn't unheard of but I've yet to meet a tenant that's aching to spend their own money on a kitchen rehab.
You're a real estate agent and you're saying that it's renting for $1,750 per month and *should* sell for (or be valued at) under $75K as it's not rehabbed at the moment. So it's call it $70K for a FMV for the "as is" property at the moment. This isn't just a "1% rule" property or a "2% rule" property it's a 2.5% property.
Usually if you're looking at a 2.5% property in 2018 you're looking at pretty dicey or extremely rural area.
On top of that, you're saying that this 2.5% property have tenants are footing the bill themselves for a kitchen upgrade...
This is either the deal of the year or something...is...well...weird...
Investor · Tampa, FL · Member since 2016 · 56 posts · 20 votes
8y
I have to agree with the other comments. I've been looking for quite some time in the Tampa market for buy/hold investments, and it is difficult to find anything that reaches the 1% rule. The only properties I've seen for $89k are in absolute war zones (which don't command that level of rent). This screams too good to be true.
Agent / Investor · Clearwater, FL · Member since 2014 · 573 posts · 281 votes
8y
Is this a not so obvious way of trying to pitch a property? Hoping someone will message you and offer to buy it from you?
Guessing from the description this is either Sulphur Springs, Ybor, East Tampa, or South St Pete. Sounds like a war zone type deal though.
Real Estate Agent · Saint Petersburg, FL · Member since 2017 · 37 posts · 26 votes
8y
This is 100% a real property. I have met the tenants, I have a copy of the leases. The only issue I have found after doing some minor research is that it is zoned single-family and there are two leases on the property. One for the front 2/1 for 1150 and one for the detached garage in the back for 600. The detached garage has been converted and was done with permits.
My initial post was a little incorrect. I was under the impression that they were putting in a new kitchen, when in reality they are only painting and they WANT a new kitchen.
Lastly, I guess it is in a “War Zone”, but the worst part of South Saint Petersburg is honestly not that bad compared to other places I’ve lived in my life.
I'm from Tampa originally, grew up on the Hills. River over by Lowry Park, so I know the Tampa Bay really well. My advice is to not go slum'in! If you have 90k in cash, step it up and stretch that money out as far as you can.
Contact your mortgage broker and ask them for a No Ratio, 85% LTV rental property quote on a 200k purchase price, so you can buy in desirable neighborhoods for better quality renters and MUCH better appreciation. $200k neighborhoods appreciate at a higher percentage than 80k neighborhoods.
Try this, purchase with your 3% real estate commission as a rebate to pay your closing costs (vs. having to pay income tax on the commission) and the remainder of the closing costs negotiate in the deal as a Lender Credit to be able to purchase with minimum out of pocket.
Investor · Tampa, FL · Member since 2016 · 334 posts · 215 votes
8y
Assuming all figures are legit, tenants paying on time, no maintenance surprises, etc -
the price may be justified because of the area.
I.e your appreciation / year may be negative.
That's usually the trade off - higher cashflow = lower appreciation.
If that fits your strategy and everything passes your due diligence then go for it!
Lehigh Valley, PA · Member since 2016 · 144 posts · 91 votes
8y
It's a gusty move. If you can handle it, the return is phenomenal. If you can hold on to it at that income level, it should be paid off in roughly 5 years. I'd even give them a new kitchen if they really are staying put. Make sure they're not "friends" of the seller.