Rental Question
I have the opportunity to purchase 3 properties at 42K each. FMV is at 50-55K each.
There is a tenant currently in one of the homes paying $625 a month. And after small clean ups (@1-2K), could easily get 625-675 on the other two as well.
Positive cash flow would be around $160 a month per house (@500 a month). And could probably pay them off in about 12-15 years. The area has a slight increase in value over time.
I haven't done any rental properties yet and was wondering if this was a decent deal?
Quote:
On 2004-03-08 16:21, smallinvestments wrote:
I have the opportunity to purchase 3 properties at 42K each. FMV is at 50-55K each.
There is a tenant currently in one of the homes paying $625 a month. And after small clean ups (@1-2K), could easily get 625-675 on the other two as well.
Positive cash flow would be around $160 a month per house (@500 a month). And could probably pay them off in about 12-15 years. The area has a slight increase in value over time.
I haven't done any rental properties yet and was wondering if this was a decent deal?
I would have to say that if this is one of your first deals, you may want to accept a relatively low monthly income. My first rental deal - I purchased a property and put about $6,000 of my own cash into the deal. I was making a little over $200 in cash flow per month and after refinancing it I'll be making over $400. Your numbers look a little lower, but you are looking at 12-15 year amortization?? Why not get into a 30 year mortgage and start making double (or more) cash flow. Do this at least until you have signifigant reserves (at least 10% of FMV in my opinion) in case of emergency. I am not an expert by any means, but I encourage you to look further into your deal, get very accurate/conservative PITI numbers, and do it! If it cash flows, I say go for it!!
What does anybody else think???
Matt
Thanks for the imput....we were looking at a 30 year ammortization, but thinking about putting 75% of the cash flow back into principal and use the remainder for repairs and other emergency funds.
We also figured a few years down the line, when we got closer to only having 50% of the total loan left, to put them into an ARM to save more money.
42,000.00 @ 15 years x 6% =$355.00 mo plus expences. I'd be all over them. Rents raise, cashflow increases. I'd just be wary of deferred maintenance. I have bought several around 25- 30k that bring in $450.00 per month. very happy. SFR's = less headache by far than Multi. They just don't cashflow as well. I personally would never do a 30 year mortgage. I need to see the light at the end of the tunnel. another 100 bucks or so per month is not worth 15 years of my life. I am in this for me first, then the kids.
Good Luck,
Shawn(OH)
Thanks Shawn....that was kind of what I needed to hear. Sounds good.