Look at these Numbers!

[Jacob Shoesmith]

Let me get y'all's opinion.

Asking Price: $265k

Our Offer (repairs needed): $230k

Their counter: $265k

Our Next Offer: $245k

They declined

Our Final offer (matched a previous buyer who backed out): $257.5k

Super stubborn folks who don't want to contribute to or fix any needed repairs. They kept saying all throughout the buying process "Well, we don't really need to sell it. We like the cash flow. We actually think its worth $275k!" The numbers proved good so we ignored this and put in our offer that was accepted: $257.5k.

We had HVAC, pest, roof, and tree inspectors come out. Estimated repairs (may or may not do some of it ourselves) = $3000. Of course, depending on the future appraisal we will try to get it lowered but based on the previous discussions my agent thinks they won't budge at all. However, the numbers still check out. See below. Thoughts?

Purchase: $257.5k

Down Payment: 20%

Payment: $1387/mo (interest, principal, insurance, taxes)

No HOA

Vacancy: 2% (college town so 1-2 week turnover)

Repairs & CapEx: ~$150/mo

Current lease thru July (college students): $2000/mo

Cash Flow: $463/mo

We plan to charge $2200-2500 in August for new college students. New cash flow would be $663-963/mo.

[Bruce Lynn]

I think your vacancy rate is low, even for a college town.  Ask area PMs what they have as vacancy factor.   Unless there is a severe shortage of rentals and you think you can rent it ugly while people are moving and it is stacked with messy college students, I'd up it to 10%.   That also may allow you some cushion for example if we go to all virtual school next year....hello Covid-19.  Do you need to allow time for any make ready?

Probably no one does it, but I like 7% capex on everything, so probably need to up that.  I would say especially with college students who will likely have more wear and tear on things.

Why can you raise rent 25% on your best case scenario?  That seems like a lot to me.

How about property management?  Are you doing that yourself?

Just throwing some curveballs at you.  Seems like decent deal.  One thing you did not mention is age of the house.