First Rental Property

[Greg Routen]

I'm a newbie and looking to purchase my first rental property. I'm taking a look at the property tomorrow, so I'm just try to do my due diligence. If anyone would be willing the share their thoughts, I would greatly appreciate it. 

I'm purchasing the property from a wholesaler, who says I can get $800-$900 a month in rent. I did some research on my end and I think it's a bit optimistic, I'm thinking more like $700-$750. Here's a breakdown on the property:

Purchase Price: $35k

Rehab: $5k

Property Tax: $92 monthly

Insurance: $40 monthly

Cap Ex/Maintenance: $125

I'm planning on buying this property with cash and will try to refinance it down the road to pull the cash out to invest into another property.

Just wanted to get some opinions from others to see if it's worth considering this property.

[Joe Villeneuve]

What's the ARV? Based on that ARV, can you get all of your cash you put in back when you refi? Based on your terms available for refi, what will your ultimate CF be? I see no mention of a PM here....why? You may think you are going to be your own (I will never again), but down the road, if you don't calculate for it now, you are stuck without it when you need it.

Assuming you can refi, and get all of your cash back at refi, and your terms are 5% for 30 years....about a $215k/month payment, your CF ends up looking like this:  $750 - 215 - 125 - 40 - 92 = $278/month.  Is that good enough for you?  Subtract for the PM and you're around $180/month....but you have no more cash in the deal, and you have a PM handling all your headaches.

One more very important item.  CAN you get a loan for only $40k?  If not, or the fees to get it are so high it makes no sense (or dollars) to do it, then you have spent $40k up front for about $5,900/year coming back...which means about a 15% CoCR...but also means almost 7 years to recover all you cash...and then start turning a profit.