To rehab or not to rehab...

[Chris Jackson]

Well - my first dose of reality. My first dose of fear.  And excitement.  But mostly fear.

To rehab or not to rehab.  That is the question.

$60K gets me into a duplex.  Half is fixed up and rented (has been for 2 years), half is this.  A bombshell.  Missing plaster, floors and walls; but full of dead animals, leaks and holes.

So help me out in conquering my fear and putting it back into a mathematical equation. Math isn't scary - it either makes sense or it doesn't.  

Owner is asking $70K I might be able to get that down to $60K.  A 30-yr fixed loan at $75K (60 + 15 for commission, closing...) is $390/mo.  The monthly rent is $600.  I do not want to do the work myself; I'd rather get somebody who knows what they're doing to fix it up. I'm thinking that I might break even month-to-month from the rented side - but is it going to cash-flow so that I can put reserves aside for doing work?  I don't have much money to put into the property myself so I'd have to get another loan to do that and then I'd be cash-flow-negative.

What would YOU do?  Walk away from the deal or get creative?  

[Brian Smith]

Is $600 the expected market rent on both units? If the answer is yes and the rents can't be raised then the answer is WALK. If you add in 20k in rehab, lawn, snow, any common utilities, and 2 kitchens... seems like a daunting task to make those numbers work. If rents can be raised with a decent rehab then maybe so. Don't try to force these numbers to work if they don't, because another deal will come around and maybe passing on this deal IS the lesson you're needing to learn on this property. Every property is a chance to learn even if it means passing it up.  Just my .02