I use the 1% rule, meaning that if the purchase price is 312k you need to be able to rent it for no less than 3100/month. The rent does not support positive cash flow.
It would be a matter of preference to say whether or not this is a good deal. What is your goal? Is it to only have someone pay the mortgage? Do you want positive cash flow and how much? Can you afford to tie up 10% or $31k?
This is how I see it, tell me if I am missing something;
312,500 purchase price
31,250 10% down
281,250 mortgage @6%=
1688 P&I
542 taxes
67 insurance
2297 PITI payment/month
150 PMI (estimate)
2447 total
$2700
-$2447
$253 positive cash flow
Now, are there any other expenses such as upkeep, repairs, utilities, heat and hot water?
Do you want to tie up $31k?
Are you happy with the income that your $31k will net you?
As I said, personal preference. What are your ultimate goals in acquiring this property?
What is the retail value of the property. If you are buying at retail and waiting for it to go up in value it will not be a good deal unless it goes up at least 15% per year. Some markets it would be considered a great deal but not here at my house. I want positive cash flow with some equity before even buying with 0 down.
AFTER CLOSING COSTS I WOULD HAVE SPENT PROBABLY CLOSE TO FULL MARKET VALUE. IF I WERE TO DO MINOR COSMETIC REPAIRS I MIGHT BE ABLE TO NET ANOTHER 7K IN THE SPRING MARKET.
I'AM PLANNING TO HOLD ONTO PROPERTY. WHO KNOWS IN FIVE YEARS THEIR MIGHT BE GOOD EQUITY.
Even with a low positive cash flow, appreciation over two years should make you atleast 30,000. That depends on appreciation rate in your area but that 30K is based off of 5% which some areas are much more than that. Even with a negative cash flow for two years you would still be making a hell of alot more than having it sit in the bank. If you want something to do with 30K just give me a call, and I'm sure I could think of something. Merry Christmas.
it does look risky to me. looks like you would have a very small cash flow and thats if the property is rented 12 months out of the year with NO improvements/repairs needed.
i would look for a better deal. look for a home that someone needs to sell that you can get for much less than market value.
just my opinion.
How easy is it to get folks renting a house for $2700? If you screen the tenants and they have good credit, etc... why are they not buying? Seems risky to me.
Help! I am interested in real estate investment. I am a school teacher. (Now you know why I need to invest )I have been preapproved by two lenders. I want long-term investments...
1. Should I shop for more lenders and determine the final by the best offer? 2. What am I looking for? I want to buy property, rent it out, pay off mortgage, have cash flow when retire.
3. I live in Georgia and have been looking for property in La. (my hometown).. cheaper and rents easily. Wrong idea or right?
HELP! I don't know where to start.
Thank you for your experienced comments!!<IMG SRC="images/forum/smilies/icon_confused.gif"> [ Edited by 504GIRL on Date 12/24/2003 ]
The housing market on Long Island is probably the hottest in the country.
In the single family market finding anything, anything at all under 350K (including handyman's & rehabbs) is a damn f***king good deal.
Also, the demographics are the most desirable. You have a huge, huge amount of disposable income & wealth concentrated in 2 counties, which will only lead to further price appreciation in years ahead (20 - 30% a year)
I say do it, but do it NOW, because that cheap house today will most definately be GONE tommarrow.
I LEFT THIS INFO OUT.
TAXES $ 6,500/YR
HOMEOWNERS INS. $ 800/YR
Me thinkith not.
I use the 1% rule, meaning that if the purchase price is 312k you need to be able to rent it for no less than 3100/month. The rent does not support positive cash flow.
Course I am a bit conservative.
Telemon is right - looks like at $2700/mo that this will not provide positive cash flow for several years.
Do you need the negative cash flow? It is not too much >1000/year for about three years.
What is the plan for this? is it an investment or your own home to ive in?
It would be a matter of preference to say whether or not this is a good deal. What is your goal? Is it to only have someone pay the mortgage? Do you want positive cash flow and how much? Can you afford to tie up 10% or $31k?
This is how I see it, tell me if I am missing something;
312,500 purchase price
31,250 10% down
281,250 mortgage @6%=
1688 P&I
542 taxes
67 insurance
2297 PITI payment/month
150 PMI (estimate)
2447 total
$2700
-$2447
$253 positive cash flow
Now, are there any other expenses such as upkeep, repairs, utilities, heat and hot water?
Do you want to tie up $31k?
Are you happy with the income that your $31k will net you?
As I said, personal preference. What are your ultimate goals in acquiring this property?
IT IS AN INVESTMENT.
THANKS FOR ALL THE FEEDBACK.
I SEE IT AS A CALCULATED RISK.
I RATHER TIE UP THE MONEY IN THE HOUSE THEN SEE IT SIT IN THE BANK.
THIS IS MY FIRST INVESTMENT PROPERTY, IT WILL BE A HANDS ON LEARNING EXPERIENCE.
What is the retail value of the property. If you are buying at retail and waiting for it to go up in value it will not be a good deal unless it goes up at least 15% per year. Some markets it would be considered a great deal but not here at my house. I want positive cash flow with some equity before even buying with 0 down.
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
AFTER CLOSING COSTS I WOULD HAVE SPENT PROBABLY CLOSE TO FULL MARKET VALUE. IF I WERE TO DO MINOR COSMETIC REPAIRS I MIGHT BE ABLE TO NET ANOTHER 7K IN THE SPRING MARKET.
I'AM PLANNING TO HOLD ONTO PROPERTY. WHO KNOWS IN FIVE YEARS THEIR MIGHT BE GOOD EQUITY.
Even with a low positive cash flow, appreciation over two years should make you atleast 30,000. That depends on appreciation rate in your area but that 30K is based off of 5% which some areas are much more than that. Even with a negative cash flow for two years you would still be making a hell of alot more than having it sit in the bank. If you want something to do with 30K just give me a call, and I'm sure I could think of something. Merry Christmas.
Tophat,
If you want to be an investor, then you should look at a better return than you are getting. Paying full market value is less than a stellar idea.
Be careful you don't fall in love with the property, the deal sure isn't sexy, and neither is the return.
With your 31k you could find/rehab/fix lower end properties till the cows come home and get a much higher ROI.
Personally I would not do this as my first deal, its a long term hold a best, and negative cash flow at worst. Much too risky.
it does look risky to me. looks like you would have a very small cash flow and thats if the property is rented 12 months out of the year with NO improvements/repairs needed.
i would look for a better deal. look for a home that someone needs to sell that you can get for much less than market value.
just my opinion.
How easy is it to get folks renting a house for $2700? If you screen the tenants and they have good credit, etc... why are they not buying? Seems risky to me.
Help! I am interested in real estate investment. I am a school teacher. (Now you know why I need to invest )I have been preapproved by two lenders. I want long-term investments...
1. Should I shop for more lenders and determine the final by the best offer? 2. What am I looking for? I want to buy property, rent it out, pay off mortgage, have cash flow when retire.
3. I live in Georgia and have been looking for property in La. (my hometown).. cheaper and rents easily. Wrong idea or right?
HELP! I don't know where to start.
Thank you for your experienced comments!!<IMG SRC="images/forum/smilies/icon_confused.gif"> [ Edited by 504GIRL on Date 12/24/2003 ]
The OP is from Long Island.
The housing market on Long Island is probably the hottest in the country.
In the single family market finding anything, anything at all under 350K (including handyman's & rehabbs) is a damn f***king good deal.
Also, the demographics are the most desirable. You have a huge, huge amount of disposable income & wealth concentrated in 2 counties, which will only lead to further price appreciation in years ahead (20 - 30% a year)
I say do it, but do it NOW, because that cheap house today will most definately be GONE tommarrow.