Turnkey rental properties

[Mike Lee]

What do you guys think of this? I know it is not the best possible deal, but when one calculates marketing, finding the deal, rehab, finding a tenant, etc....in this age of outsourcing everything...it is kind of appealing.

I came across this property ~10 months ago it was an REO sold for 35k. 3/2 SFR. It was rehabbed and there is a tenant in it now paying $1000/month.

I calculated and after taxes insurance debt service, and even property management fees...it will cashflow about $300/month. There is a tenant already in there. Seller is asking for 80k. The comps do not show this because there are alot of REOs in area. I am qualified for conventional loan and this doesnt seem to be a problem.

What do you guys think?....its kinda scary...walking into a deal cashflowing the day you close.

[Jon Holdman]

Most months you'll be somewhat below the 50% rule. You'll always have taxes and insurance. Some months you'll be a bit over the 50% rule. Doesn't take much in the way of a heater repair or some such to eat up a few hundred bucks. Some months you'll be vacant and you'll be well over 100% between the vacancy and the fixed expenses. Every now and then you'll have a really big expenses and be at 500%. There's a handful of things for houses that are like that, and have lifetimes from 10-50 years. So, maybe you have one of those months every 10 years. That's 5% all by itself.