All Forum Posts by: Kevin Patrick

Revisiting this... after inspections by plumber, foundation, and AC (not a general inspector) and winning the fight to get utilities turned on, I've come up with $25k of repairs/replacements.  Foundation is just about the cheapest repair, at $2k.  Ground needs to be graded so rain water flowing downhill stops flowing under the house.  After two hard freezes, there's so many pinprick holes in the pipes that it's best to replumb the whole house with PEX.  Central HVAC is completely shot, so there's $10k.  One bathroom just needs work and a new toilet, the other needs to be completely replaced.  For four tenants, need additional driveway/parking (probably going with permeable plastic laid on the grass - I have this at my house and I love it, and no permit needed for a pad).  Black water goes through a sump pump to get uphill to the street, and I'm budgeting for a complete replacement.

I'm working through a realtor.  But I need to go back to the seller and say "$65k isn't going to work.  I can offer $..."  What?  What do I offer?  If I want to end up at $45, even $50, do I really start at $30k?  

While I have an emotional attachment to this property (I knew the deceased previous owner, and hoping to own the other two properties next to it as a little compound), I'm also ready to walk away and say this isn't right for me and my real goals in REI.

-Kevin

Hello, BiggerPockets people.  I'm in Central Texas.  I want to see if my second deal looks right.  

My first deal was easy, and continues to be.  I'm a college professor, renting to college students.  I invested because there was a need and ready renters.  Buy and hold. Mobile home, new, $39k at 6% for 15 years, no down payment.  Annual rental income was $12000. Insurance, taxes, mortgage, and park fee were $8500.  Pest control and cleaning, $500.  Setting aside 5% for repairs, left me with $2400, or $200/mo.  The calculator I'm using shows a Cap Rate of 18.5% and cash-on-cash return of 40.9%.   

The new deal is a foreclosure, that I tried to buy from the deceased owner's family before it went to foreclosure, and so I'm buying from a bank at a higher cost probably.  $65000 at 6%, no down, for 15 years. $2000 closing costs.  $5000 in repairs.  Mortgage, taxes, insurance, 5% repairs, at $850/mo. Rent at $1200.  The calculator shows a cap rate of 13.7% and Cash-on-cash of 28.9%.  Less return, but more equity, and the equity means something because I'm owning the land and the house won't depreciate like a mobile home.

So, what do you think?  Good deal? Am I missing expenses that make it not such a great deal?

BTW, long term goals are buy and hold single family or duplex homes within driving distance.