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[Bryan Graf]

Hello everybody,

I am a new investor about to make the leap into investing in rental properties. I have been searching the interweb for a forum just like this for a month and I am very glad to have found it.

I have a contract on my very first rental property, and a couple other offers out to sellers. I am looking for an advisor to help me figure out what is the best use of my capital and what are the best deals. There is only so much I can learn from books and websites. I'd like to talk to someone in the business in Florida (Hillsborough county preferably), but really I'd take help from anyone interested in looking at numbers and telling me whether i'm crazy or not. If someone offers professional advisory services send me a message.

Info about my current offer:

location: St. Petersburg

offer: 60k (seller pays 6% closing costs) 20% down

three unit MFR full occupancy
Rents 795 595, and 625

No major repairs needed. Property is in decent condition and in a good blue collar neighborhood. The price is better than similar MFRs in the area. This deal seems too good to be true, which has me in agony thinking I'm missing something, otherwise why is this property still available?

If anyone has any input it would be greatly appreciated.

Thanks,
Grizzly

[Sharad M.]

Hi Grizzly,

I am not from Florida or anywhere close, so I am not familiar with the local market, but as far as the numbers are concerned, it looks to be a good deal. People on this forum talk highly of 2% and 50% rule.

2% rule is that the gross monthly rent should be at least 2% of the purchase price, so in your case the gross rent should be at least 1,200 (2% x 60k, I am ignoring the closing cost). The percentage works out to about 3.35% in the case of this property, which is not very uncommon in this economy.

50% rule says that the monthly expenses (excluding P&I) will average 50% of the gross monthly rent. So your net monthly cash flow will be equal to (Monthly Rent/2 - P&I).

Couple of things I will look out for is:

1) Are the utilities included in the rent?
2) Also, I have had this problem with couple of the properties I had accepted offer on that the property was listed as 2-unit; however, the county or the city assessed it as a SFH. So be careful that the property is listed as legal 3 unit with the county also.
3) From your note it looks like there are no major repairs needed, but I will highly recommend having the property inspected by a professional inspector. You never know what may come up.
4) Will you be managing the property yourself? If so, do you feel comfortable about the neighborhood?
5) Also, make sure the taxes aren't outrageous for the property. That could affect your cash flow drastically.
6) And if the property is in a flood zone, the insurance cost could be high.

These are some of the things I could think of, I am sure some more experienced members will provide you more feedback.

Good luck.