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Updated almost 18 years ago,
Is an average deal okay to start REI career?
Hi, I'm in California and the property is located in Georgia. (My mom lives in Georgia so I have someone that help out if need be. I plan on using a property manager.
Here's the scenario. The deal I have is an average deal. Not a great one unless I bid 360k...but I doubt the buyer will accept it... I just want to get my feet wet but not make a tragic mistake.
This is my first REI investment and it's out of state so I wanted a class A or B property which is why the deal is only average....
The property is a Quadplex. 2 units 2/1 and the other two are 3 1/1. Tenants are signed till 2008. Good area with growing population.
I'm assuming 10% vacancy rate, 6% property management. The cap rate I think is 6.5% and Cash on Cash is only 3%. New roof and gutter guard in 2006. Newly painted in 2006.
Purchase Price $400,000.00
Down payment $80,000.00
Mortgage at 6%.
$1918.00 Monthly debt payment
Gross Rental income
$37,020.00
10% vacancy ($3,702.00)
Tenants pay utilities
Tax $3600
Insurance $1500
I'm assuming 6% property management. I figure my cash flow would be $250 per month.
What do you think I should offer to make this a more attractive deal?
I mean I know he's asking for 400k but what would be a reasonable counter? Cover all my closing costs? Paying more points?
Should I go ahead? Or wait? I have 200k and a steady job.
Paralysis by analysis or just pass for now?