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Updated over 5 years ago on . Most recent reply

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Andrew Funk
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Does this deal make sense?

Andrew Funk
Posted

I'm looking to purchase my first rental property. I'd like to follow the BRRRR strategy, but walking into most of the homes that need rehabbing terrifies me. Most homes in my area and within my budget are 50-100+ years old. My most recent property tour was a home built in the 20s. It was vacant and squatters had recently moved out. There were syringes and prophylactics strewn about. Holes in the walls all over the place, surface mold and the sub-floor was dilapidated. The guy wants $60k. I offered 1/3 of that which was immediately rejected.

I haven't yet assembled my team (still need a contractor) so I'm wondering if purchasing an out-of-the-box property is the way to go? Here's the deal details:

  • 3/1
  • 850 sqft
  • Blue collar neighborhood. Reasonably close to public transit/stores/shopping
  • Current rental certificate
  • Current tenant (reached out to current PM to get info on screening process)
  • Rehab included:
    • HVAC-furnace and A/C
    • Flooring
    • Sheet Rock
    • Siding, soffit, fascia, gutters/downspouts 
    • New windows
  • Roof: unknown when last replaced
  • Asking price: $92k
  • Taxes: $950/year (tax abatement on improvements for 10 years)
  • Insurance estimate: $750/year
  • Current rent: $950/mo

Questions:

  • Is this a reasonable deal?
  • What would you estimate/mo for CapEx?
  • What would you estimate/mo for routine repairs?
  • What would you estimate/mo for vacancy?
  • What would you estimate/mo for property management?

Thanks to all who respond!

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