Would You Do Either Of These 2 Deals?
I just saw several 3 family houses this weekend in Connecticut. Two of them looked like possibilities.
The numbers on the first 3 family house is:
Selling Price: $190k
Percent Down: 10%
Mortgage: 30 year fixed at 6.5%
Monthly Mortgage Payment: $1080
Monthly Property Tax: $388
Monthly Water & Sewer: $150
Monthly Insurance: $120
Monthly Heat: $200
Monthly Cost to Maintain LLC: $40
Total Monthly Cost: $1948
Total Monthly Rent: $2325
Total Monthly Profit: $377
The numbers on the second 3 family house is:
Selling Price: $208k
Percent Down: 10%
Mortgage: 30 year fixed at 6.5%
Monthly Mortgage Payment: $1183
Monthly Property Tax: $425
Monthly Water & Sewer: $150
Monthly Insurance: $120
Monthly Cost to Maintain LLC: $40
Total Monthly Cost: $1918
Total Monthly Rent: $2550
Total Monthly Profit: $632
Please keep in mind that if there is a vacancy, or something breaks, the profit numbers would surly go negative for the given month(s). Also, the first house sold 8 months ago for $159k, and the owner did not really put much into the house (sounds like a hefty flip). The second house was bought a year ago for $145K, but I don’t know how much work the owner put into it. I think that both houses would appraise without issue. The prices I indicated is what I think I can negotiate them down to, and not what they are currently selling for. Please let me know what you think (do these 2 deals make sense)?
You need to figure some kind of vacancy rate and you also need to put some money into a repair fund. When you start doing that your first deal looks very slim if you need cash flow.
If your second deal is in a decent area it deserves a closer look. But only you can decide if it is right for you.
1st deal- NO
2nd deal-maybe
1st deal - NO
2nd deal - YES
Other than walking away, your options on the first deal are to increase rent, decrease price, or make the necessary changes to have the tenants pay their own heat. That may not be feasible, but you're in CT, not exactly a year-long summer state.
Good luck
How realistic are those rent numbers? They sound kinda high...