Does this deal make sense?

Question

The owner of the house across from my in-laws passed and his sons are going to put it on the market.We contacted the realtor and got a 10 option before it hit the MLS. From what we understand it just needs some paint before we could rent it out. Obviously we have to get inside and see what the true condition is. We plan to use private money to acquire and refinance after 6 months. The house is Highlands TX in a good neighborhood. I used the BRRRR calculator and can provide more info if needed.

If everything checks out and my numbers are correct is this a good deal?

Purchase price $100,000

Repairs $5,000

AVR $135,000

Monthly cash flow $103

ROI 12.74%

2% rule 1.22

If everything checks out and my numbers are correct is this a good deal?

Purchase price $100,000

Repairs $5,000

AVR $135,000

Monthly cash flow $103

ROI 12.74%

2% rule 1.22

Christopher Phillips · Answer

@Roman McIntosh

I'm going to say there isn't enough information. You haven't seen the inside. Older people pass away their homes tend to be super outdated. That would push your repairs up, reducing your ROI.

What are you other assumptions? Rent roll, vacancies, repairs, capex, PM?

Chris Hopper · Answer

Much better deals out there than to chase $100/mo cash flow.

Account Closed · Answer

I like @Christine Kankowski's idea of a fix and flip.  But you need to get inside and see what it looks like.  Is the family out of state?  How motivated are they?  If you can get inside, confirm it only needs some minor repairs, paint, carpet, etc, and make them an as is cash offer, you might could get a good deal.  But leave plenty of cushion and be willing to walk away.  It never hurts to put in a low offer then walk.

Joe Gonzalez · Answer

If you were to flip it would it be profitable? If the answer is no then don't bother.

From the numbers you provided my conclusion is that you need to get this property at 75-80k.

Jim Adrian · Answer

Typically want more than $100 a door but you also need to look at Cash on Cash Return.  At $1300 rent = $120 cash flow but  5% CoC.  If you can get $1600 rent = $310 cash flow and 13% CoC.   All this depend on what your minimum amounts are.

Roman McIntosh · Answer

I looked inside the house. It is small, clean and in good shape although a little dated, Carpet needs to be pulled tight, appliances are new. Tile, cabinets and counters are in good shape but dated. I would think that would need to be updated for a flip but wan't in the plans for a rental.

One think I am having a hard time is understanding is cash flow. All the expense calculations are based on a percentage of rent. The only variable is the mortgage and a $10k swing in either direction doesn't seem to move the numbers much. So what are expectations of cash flow per month in the Houston area?

Christine Kankowski · Answer

Maybe its worth it for a quick flip if all it needs is paint and carpet.

Ralph R. · Answer

@Roman McIntosh  go ahead and view the thing. The expierence will do you good. Then when you have seen it call a property manager. They should have a good idea what rents are. That should tell you what you can pay for the house. I would forget the BRRRR calculator. This isn't that kind of house. Use the rental calculator instead.  I use 10% cap ex, 10% pm and 8 to 10% vacancy. Repairs are minimum 5% and maybe more   It depends on what I see if I view it. Depending on the age of the house etc these numbers usually work for me In my area. Google rent o meter and you can get an idea about rents. This one is very close to break even.  But then again my markets here are tight also.   It might not be a good one for a new guy. RR

Roman McIntosh · Answer

@Ralph R. I got a quote for insurances (higher than my estimate)  Taxes numbers a real. No HOA and the tenet pays water, sewer and garbage. With doing the property management and the real cost of insurance this is a loser at $1300 per month.  I am estimating the rent,  the range for the area $1200-$1675  but very few SFH for rent for me to make a good comparison. $1450 is what rent needs for $132 cash flow.  Not sure if that is reasonable or not.

Thanks to everyone that responded. I'm still very new at analyzing deals. I shared the calculator if anyone would like to tell me what other errors I've made.

https://www.biggerpockets.com/calculators/shared/1...

Does this deal make sense?

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