Offer accepted on SFH Hammond, IN, but should I bail?

Question

Hi! I'm kinda panicking as I always do when making final decisions. Would so grateful for your thoughts on an offer of mine that was accepted on an out of state SFH. Getting cold feet and not sure if I should back out. I know that everyone has a different risk profile but I see conflicting reviews about the area being a C neighborhood, with crime and Hammond being known for "chasing our landlords". I'm not thrilled about a few things on second thought. Here are the stats:

109,900, new lease starting next month @$1195 per month, taxes $20003 bd/1 bath, 860 square ft, large fenced in lot @ 173rd and chestnut, between Colombia center and Purdue U.

Rehabbed foreclosure, 1955

New hvac, New roof, 1 year home warranty paid by seller

Initial expenses about $6000 for:

Appliances ( no stove or fridge)

AC  (duct work in place but no central unit)

$130 monthly cash flow

6.29 cap rate

COC 5.2%

(Vacancy , 8.5%, capex, 8%,Management 10.5%, maintenance/repairs 8%)

I’ll be taking a mortgage out on it. I know it’s not a deal but am I overpaying? Comps seem to be from $98k-$120. Should I run? Not happy with having to put in appliances and the AC which was promised to the tenants.

I’m also thinking about the future and an exit strategy which I believe is important. Neighborhood may not have much appreciation and the curb appeal is just ok. Would likely go to an investor rather than a family if all things remain the same in 10-20 years. Wondering if selling would be tough ( of course can’t predict the future)

THANK YOU SO MUCH I’m advance for responding to this nervous nelly.

Jim Meloche · Answer

hello suni - whoever mentioned second hand appliances above is spot-on.  we do that for all of our rentals.

i haven't delved into your numbers, but $130 doesn't sound like much at all in cashflow for a SFR.  one water heater replacement blows your cash flow for almost an entire year (although maybe you've accounted generously for capital expenditures like this).  the only way i'd consider a CF figure like $130 is if the property value trend is very solidly up....

Henry Lazerow · Answer

Cap rate seems low you can buy a property in a nicer area for those kind of returns. Make sure the taxes are non owner occupant or you will be in for a surprise when you get re-assesed at landlord rate.

Kim Heretick · Answer

Oh, and after my last offer was accepted on a $100k duplex, after the inspection I asked to buy it at $80k.  They accepted.  Inspections always come up with a list of things that could be repaired.  Quantify them and ask for a reduced price.  Mine was extreme and I was shocked they accepted, but it really helps (or gets you out of an iffy deal).

Kim Heretick · Answer

I think you can reduce your costs by buying second hand appliances.  Look on Facebook Marketplace.  You can find some in very good condition.  I've had great success and some sellers will even deliver and hook it up for you.  I do this for all of my washers and dryers too.  If that is all you need to do, it sounds good.

Do you think property values in that area are solid or are they slipping?  That should be a factor.  What will you be able to sell it for later?

Suni O'neal · Answer

@Maugno M. None of these things are a surprise to me. I considered them in my offer. I put this post here because I’m second guessing myself as I mentioned. Surely, some buyers question their choices throughout a purchase as a checks and balances thought process. I posted here for anyone to add some of their experience if possible especially those who are local having a sense of the neighborhood. I did a lot of research on my own (which is not obvious from my post but I wanted to keep it as brief as possible). I can afford to have a relatively lower cap rate/cash flow because I have a great job at this time so it wouldn’t be the worst thing if the deal is not perfect but again I posted for any helpful comments.

Suni O'neal · Answer

@Kim Heretick, will consider your suggestions, thank you !

Account Closed, thank you. I should say that I have a broker. I’m actually using roofstock for this home which could be my first problem, ha. I’m pretty much left to my own devices. I realize that I may be too eager.

Daniel Guerra · Answer

@Suni O'neal

Hammond Indiana is a pretty big area. There's some good spots and not so good. Overall though, Hammond has been making improvements and I like the direction it's going in. In 2024, there's a planned train line that will head north and south within' Hammond not too far from your property. I fixed up a home in Hammond and it sold fairly quickly.

I think your deal is Ok. You won't lose your shirt over it but make sure you have a private company do an inspection on the property. Don't let the turnkey company do it for you.

Make sure to run your numbers and that you will be cash flow. The Hammond market won't appreciate like crazy.

Best of luck!

Justin Smits · Answer

Did you end up buying this property? We have one about 2 blocks away and crime around the Columbia center is on the rise with breakins and recently two shootings in the last 30 days.  This includes MY RENTAL being shot up last week.  I've had a few in this area and have watched the crime increase in this area.

Maugno M. · Answer

@Suni O'neal  Why didn't you consider all these things before putting in an offer ? This should all be considered before the fact.... now in the future other brokers may not take you seriously.

Suni O'neal · Answer

I have a broker

Offer accepted on SFH Hammond, IN, but should I bail?

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