1st Time Investor - Need Help Analyzing a Deal

[Jenny Sung]

Location - Spring, TX

Built in 1977, 3/2, approx 1500 sqft

Contract Price - $120k

Locked-in Mortgage Rate - 3.5%

Total Monthly Rent - $1450

- Comes with Section 8 Tenant (Mom & 3 kids)

- Buyer pays title insurance

- Big items to account for after inspection:

1. Tree too close to the house, needs to be cut down
2. One side of the garage door opener has no outlet to plug into (there are a total of 2 single garage doors)
3. Kitchen sink drain pipes are "amateurishly" done
4. Rusting of the evaporator coil in the attic (20 yrs old)
5. Attic lines don't have enough insulation
6. One bathroom toilet is cracking and needs to be secured
7. Roof is missing gutters
8. Roof shingles vs flashing wasn't done 100% correct, needs more space

The buyer agreed to a $500 closing cost credit. Would I be dumb to not move forward in this deal?

[Blake Dailey]

To get a great answer you would need to know your total repair cost. But with the items you mentioned, it doesn't sound like anything major unless the roof needs replaced - that could kill your budget and sour the deal. On the surface it looks good, it beats the 1% rule and is likely to cash flow. And a lot of those repairs are things you could bootstrap and do yourself so don't let them scare you away. Run the numbers on your worst case scenario and it if still makes sense then I say go for it. You will learn so much by just doing your first deal and make it that much easier for the second one.