1st investment property

[Shaun D.]

Hello,

I'm new to RE investing and I would like some advise on the following. I'm considering making an offer on my 1st property. It's 310K - 4 Bedrooms / 2 Bath - 1275 Sq Feet SFR. I'm estimating property taxes and insurance at about $450 monthly. I have 250K on a line of credit with interest at an Annual Percentage rate of 5% that I can utilize. I'm estimating that I'll need to maybe put in an additional 15K for cosmetic fixes. It seems like similar homes in the area rent for 2200.00 monthly. Would you recommend proceeding?

[Jeff Bridges]

This is the Cashflow I see based on your provided numbers. You need to be doing this type of analysis on each of your deals with this level of detail. Use the BP calculator if you can’t do your own:

Monthly Expense:

P&I- 1250

Tax and insurance- 450

vacancy 8%-176

repairs 5%- 110

capex 5%-110

Property Manager 10%- 220

total: $2316

Income:

rent- 2200

Cashflow: -$116/month

$77,500 DP

$15,000 Rehab

92,500 total investment

Thats negative 1.5% annual ROI :)

How does that deal sound to you? I already knew that 310k purchase price and 2200 in rent netted a less than 1% deal and would have stopped there. You'll get there with practice looking at deals. Don't skip any of the above figures to make your numbers look better or you'll just  get burned when you think too optimistically. you WILL need those contingencies like capex roof replacement and being able to afford a PM because no one wants to be forced to manage your own rentals forever because they forgot to budget for that expense. Good luck!