Weird location, is it still a deal?

Question

Hello BP,

I might have found a deal. The owner is asking 48K for the house, it can rent for $750 a month and it is ready to rent. The house has 780sqft, 2 bedrooms and 1 bath. The only catch is the location. The house doesn't have access to a street, it is in an alley. Also, there is no off-street parking, but the tenants could park in the alley (the city is fine with this) or I could rent a parking spot from the neighbor.

I called the city and they said that they do plow the snow in that alley since the alley is actually marked in the city as a street. I think the house would appraise for 55K, but not entirely sure because of its location. I could build a parking space in front of the house if I do a retaining wall too. I plan on keeping it as a buy and hold property to generate cashflow. What would you do?

The empty lot next to the house (right) is actually not part of the house.

Jose Pena · Answer

Thank you all for your feedback.

I did put the house into a contract, but after a survey inspection, some issues arose with the location of the house. Therefore, I decided not to pursue it since the issues were major and would take the property from positive cashflow to negative. I did lose $200 on inspections, but well worth it. A good learning experience. I was excited to close on it, but it wasn't meant to be.

On to the next one. Again, thank you all for your comments and feedback, I really appreciate it.

Derek Bailey · Answer

Hey Jose,

My two cents is only you can define a deal. Only you know what works for you and what you're willing to deal with. I'm sure more experienced investors will have a lot better advice. lol. I've ran across "weird" properties too that make me hesitant but I think mostly anything can be made into a profitable deal. It appears from the picture that the neighbors are in a similar situation....? Is this the norm in that area?

I notice you're in Omaha, I've been looking at properties there. We should connect.

Best,

Derek

Jim Adrian · Answer

@Jose Pena

I lived next to a house in town that had no off street parking and was alley access only  but it fronted the major street and the couple didn't seem to mind alley access.  It did have a parking for 3 cars off the alley.  For functionality it must have on-site parking of some sort, like for 2 cars.  they will park in the alley and block it.  In this case it would be ok since they are the only ones on the alley. This looks like a tough sale.  Its also 2br which is a niche market as well. This will rent lower than others in the area.  If you are really interested in it then look at a really low offer.  I doubt the city plows this regularly but only when you call them.   They never plowed my alley.   If you buy this make sure you can care a longer vacancy.  You will have lower end renters given the area.

Chheang Yang · Answer

The house is definitely an interesting setup.  I understand it's a cheap home to purchase, but keep in mind that it's a 2bed, 1 bath and that's a major limiting factor in the future.  Make sure you account for the cost of digging out and building that retaining wall.  I would highly suggest digging out enough space for 2 cars to park.  You're probably looking at a pretty major project.  If possible, start calling around to check on how much that's going to run.  Also, keep in mind that you may finance the purchase, but you'll have to put out cash for the parking... and refi again afterwards.

Assuming the house is fully rent-ready... I think you'll cashflow positive, but it may not be as much as you'd expect.

Antonio Esquivel · Answer

How much would extra parking cost? From the pictures it looks like there isn't any room. How much are taxes and insurance a month? I estimated $900 each. How much would you put down? 10%? If so at a 4.5 interest rate your payment is about $370ish. For a 2 bedroom this would rent for about $700, probably with the parking situation. $600 during the winter. That's about $330-230 a month.

Jose Pena · Answer

@Anthony Gayden, I plan on adding off-street parking to the property by building a retaining wall in front of it. The only concern is the alley. I plan to rent the property. I did think about the difficulty of selling it in the future, but I think another investor with a buy and hold strategy will be interested. Thank you for your feedback, really appreciate it. @Mark Maly thanks for the feedback. The property is in South Omaha, really close to the zoo. I've had a really hard time finding a property with a decent amount of cashflow, which is the reason why I decided to pursue this deal.@Derek Bailey The neighbors are not really in the same situation because they all have access to a paved street. My realtor told me that this is kind of unique, so it is not really the norm here in Omaha. Feel free to PM me and we can definitely chat about the Omaha market. I'm really new at this :) just making sure to set the expectations, but I'm learning and willing to help out in any way I can.I'll keep you all informed of what I do and how things go. Thanks again for your comments.

Anthony Gayden · Answer

Don’t do it. I never would recommend buying in a location in Omaha with no off street parking. That is a huge negative for renters. The fact that it is in an alley makes things even worse.

What is your plan for this property? If it is simply cash flow, I can tell you that for that price you can find far better locations.

When you decide to sell in the future you will have a difficult time because others will see things the same way I see them. I also don’t see opportunities for a BRRRR or price appreciation due to the size/location.

Mark Maly · Answer

Depending on the area, $48k can be a little steep for a 2 bedroom.  If its in Northern Omaha, that would be more retail pricing, especially if there is no off street parking.

There are a lot of opportunities out there where you could get similar numbers in regards to price vs rent, but could get a "more ideal" property that may have 3+ beds and has off street parking.

I tend to shy away from anything that is a little "funky" just because there is quite a bit of other opportunities out there.

Weird location, is it still a deal?

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