potential deal in Idaho- my first deal possibly?

Question

I am a new investor looking for advice or helpful criticism of my abilities. I live in Colorado, but am looking for rental properties in Idaho. I chose Idaho because the population there is growing (1.08% growth) even more than Colorado (1.66% growth), according to my research. Additionally, the average house price is about 100,000 dollars lower in Idaho, which helps make the properties more affordable for me. I have good credit, but almost nothing in assets or cash, so if I apply for a mortgage, I don't qualify for Denver house costs. Anyway, I want to invest in Idaho, because with a population increase, I'm hoping there is steady demand for rentals. The agent I have been talking to has several properties in the area and says he can fill a rental in a few days. The area seems promising, but here is what I found about the house!

1462 square foot 4 bedroom 2.5 bath SFH listed for $154,900

Aside from minor cosmetic damage, there is supposed to be no damage to the property. (we will see if I have the house inspected)

$1220/yr property taxes

Automatic sprinkler service

.150 acres

built in 1922

no HOA

similar properties rent for 1200- 1300

I made a spreadsheet based off of Frank Gallinelli's calculations in his book about RE investing cash flow.

The utilities are based on the average use in Idaho. The "cash in" figure has a 2% vacancy discount. Am I missing anything? I want to mitigate risk as much as possible, but since I'm new, I may not now exactly what the right questions are to ask. I will ask how old the water heater and furnace are, as well as the last time the roof was redone, but I don't exactly know what else to find out. Any suggestions, or anybody have experience in Idaho?

Kelly A. · Answer

Vance, are you planning a visit? I'm an Idaho investor living in California, and can't imagine having bought without a research trip. We did a thourough tour, identified specific neighborhoods we were interested in and did not stray from them. After we made offers we flew out again for inspections.

Aaron K. · Answer

If it is a SFR you probably won't be paying utilities, also I would estimate a bit more for initial rehab, and it looks like your calculator didn't account for your 10% property management fee.

Vance Corich · Answer

Wow, thank you to everyone! This has been incredibly helpful! I can definitely see now that this deal just wouldn't have enough meat on the bones, I'm very grateful for everyone's participation in this thread! I am going to keep looking and reaching out for new ideas and information to make a better judgement call on the opportunities that I find!

Don Spafford · Answer

@Vance Corich In my opinion, this is not a good investment. Your analysis shows monthly cashflow is under $100, assuming everything works out perfectly, but there could be issues that will make it a negative cashflow. If property taxes go up any normal amount, your cashflow will almost be wiped out, unless you are positive you can increase rents. But for me, it is too thin for the risk, unless your goal is to hold for appreciation, but that is also very risky. It is an old house so probably will have unexpected maintenance issues. I would keep looking and don't rush it. I personally analyzed close to 100 properties before I found the "perfect" one for me. But I think you can get more bang for your buck in other areas of Idaho. You can find a duplex or other multi-family for about the same price or less and get better cash flows for example in Pocatello, which is on the other side of Idaho that doesn't get talked about much. It is a college town but has a large hospital and other businesses there as well. It has been the best area for me, where prices have not shot up super high yet. Do some research and if you are interested, PM me and we can discuss more. I'd be glad to check any out for you before making a trip out here yourself. Good luck!

Bill S. · Answer

@Vance Corich make sure to investigate the economic base. My sister lived where Mircon had a large presence. When they fell on hard times she said it took a decade for the area to come back to previous levels. Diversity is key but it's also hard to find in an area with less than 200,000 people.

Tyler Resnick · Answer

Make sure you ask her about gang activity. Nampa and Caldwell have been battling this for many years. They have gotten a lot better but it still exists, this is from a little over a month ago: http://www.ktvb.com/mobile/article/news/crime/20-indicted-in-takedown-of-treasure-valley-gang/482872359

Vance Corich · Answer

I definitely agree that it can be risky to invest in a place I'm unfamiliar with,  so far I have found that Nampa is the second largest city, the median age is around 30 yards old, the crime rate is slightly higher than the national average,  which makes sense for a big city,  though the house I'm looking at is not downtown, the average income is around 45000 (if I remember correctly) and I'll learn more about the neighborhood when I talk to the realtor tomorrow,  such as if it was built on a landfill or other questions I dream up. Thank you for your input!

Tyler Resnick · Answer

Nampa is a town that has great spots but you don’t want to invest on the other side of the tracks so to speak. Put eyes on the neighborhood before you buy.

potential deal in Idaho- my first deal possibly?

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