Investment in Lawrence - Low Comps but good NOI

[Jithin Yohannan]

Hi All,

I am in the process of buying my first property through a reputable online turnkey company in which does buisness in Indianapolis. 

It is a 4/1.5 bath located in the Lawrence neighborhood on 52nd street. Asking price is $75k (firm) and there is a tenant in place that is paying $900 a month on a lease through September 2018. From what I can tell the rents or accurate for the neighborhood which has a C crime rating and is in the Lawrence metropolitan school district (some schools getting 8 or 9 out of 10 scores). The inspection report was pretty positive, roof is in average condition and will need to be replaced in 3-5 years. HVAC is good with 10+ years of life. 4 windows need to be replaced at the next turn. 

The issue is the comps have come in between 32 and 60k. Though there are some individual properties on the comp sheet that have a value well into 70k.

My question is would I be safe buying the property based on the income stream alone. My strategy is to buy and hold for the long term. I will be financing with either 15 or 20% down and an interest rate a bit north of 5%.

Would love to know your thoughts!

[Rodney Kuhl]

@Jithin Yohannan You may be planning on buying and holding for the long-term, but I still don't think you want to overpay for a property. Your cash flow numbers may look good, but what if you have an emergency and have to sell in the next 5 years? If the comps are really $15k or more less than your purchase price, you'd take a big loss on the sale because you wouldn't have paid down much of the loan by that point. That may negate any cash flow you made during those years.