Is this a deal?

[Eddie T.]

Hello all I need help analyzing this deal whether it makes sense or not.

Owner owes the bank 36k on the mortgage with 26 years left. House is worth 40k but has been vandalized so would take about 10k to get rent ready.

My plan would be to take over the mortgage payments subject too with 0 down as he is losing $400 a month by it being vacant.

Monthly Rent $950

P&I   $189

Tax  $ 183

Ins   $ 50

Maint $ 80

Vac    $ 80

mngmt $ 95

Capex $ 47

so cash flow would be $226 a month

[Mark Elliott]

hi eddie. first of all, you are in new york, so the taxes part of this formula will change every year, and that means NOT go down. consequently, your monthly cash flow will decrease as well. lets look at the bigger picture. a house, bought 4 years ago, is now vacant. why?? after 4 years, this current owner has already figured out that this deal doesn't work for him. why?? if it doesn't work for him, why would you think it would work for you? he could put someone in there as well as you could and the numbers would work the same for him, so why doesn't he do it? simply...... because this place, with these numbers don't work. there is no equity, there is not going to be any equity for some time to come because the market in new york sits pretty still, and there is no one living in the place right now to get instant income from. obviously, no one live there very long anyway because it is vacant and this guy has only owned it for 4 years. in any rental situation, you can factor in a 25% vacancy rate as well, meaning at any given time, you will have no one living in there for 3 months of the year. $226 per month times 12 months of the year is $2712 per year. factor in 3 months of the year with no income at $950 per month, and your total years profit is gone. i would run the other way on this one. find another deal. they are out there