3/2 SFR: $45,000

[Mark S.]

Purchase Price: $45,000
3BR/2BA, 1000 sq ft, 25 years old.

Down Payment @ 20%: $9,000
Closing Costs: $3,500?
Principal & Interest (@5% fixed, 30 yrs): $161/mo
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Taxes: $37/mo
Insurance (estimate): $50/mo
Vacancy (at 8%): $48/mo
Cap-Ex (at 10%): $60/mo
Repairs (at 10%): $60/mo
Prop Mgmt (at 10%): $60/mo
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Total Expenses: $315/mo
Tenants would pay all utilities.
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Gross Rent: $600/month
Less Expenses: -$315/month
Less Debt Service: -$161/month
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Cashflow: $124/month

WHAT DO YOU GUYS THINK, DEAL OR NO DEAL?

[David Beard]

Does the house need any work at all? Are the roof or any of the mechanicals over 12 years of age? What is the class of the neighborhood (B-, C+, C, C-)? Is it a rental-dominated neighborhood? Is it a reasonably safe area?

$600 rent for a 3/2 sounds pretty weak, is there upside? Have you researched rent comps on Craigslist and calling signs in the area?

Closings costs shouldn't be more than $2,000, and hopefully $1,800 ($400 appraisal, $400 title search/closing fee, $600 lender fee, $150 misc, $250 owners title insurance which is optional).

If you use a PM, will probably be more like 14% (8-10% base fee plus 50-100% of one months rent for leasing fee)

Deal seems very marginal. If house won't need anything for at least a few years, and the neighborhood isn't too bad, and your market doesn't have anything better, then it may be MINIMALLY acceptable.