potential deal. Please advise

[Jerry Gao]

Hello guys. Potential deal here. Buffalo ny

200,000

3unit

Current market rent is 2100 monthly total.

Taxes 3300 annually.

Current condition unknown. Given that it doesn't need much work, how does it look? Going to look at it later.

800 insurance.

10% management fee

1400 annual utility

Escrow 1500 annual in repairs

Any input is greatly aappreciated

[Joel Owens]

At 200,000 you are barely crossing the 1% rule meaning gross rent equals 1% of the purchase price. Edit: 2,100 monthly is about 1.3% sales price ratio.

2% depending on how rough the area is or more is ideal although many investors in speculative areas that are overheated can't get close to the 2% rule. If you buy in those areas you are really gambling on appreciation on the back end more than cash flow growth today.

Some areas of New York have rent control and can be pro-tenant where it takes you a ton of time to evict. I have heard 6 months or longer in some cases talking to New York investors who are local on the phone. Age of the building is key also as the ongoing repairs can eat you alive.

It's like a younger person age 20 in that for the most part if they get sick the cost is minimal to get them back on track ( there are always exceptions) but an old building that has been let go is like a really old person in their 80's where it takes a lot of ongoing care and attention to keep them going. If you aren't constantly fixing things the whole place can fall apart. I generally do not like very old buildings because they tend to be money pits and you can't see what is behind the walls. Especially when you are not cash flowing much and banking on a speculation play those unexpected repairs can take you under.