Please help me decide whether or not to buy this property. I'll provide the facts I think are pertinent, if you have other questions/points please let me know.
- 3 bed, 2 bath townhouse with single garage located in small town WY
- Cost $125,000. Purchasing from close friend that needs the cash. This is market price, wouldn't be getting a friend deal but would be purchasing without a realtor so might ask for 3% off since I wouldn't have a buyer's agent and she doesn't have a seller's agent.
- Recently painted and has new carpet, in rental ready condition
- located 4 hours away from where I live (Colorado) but I have family and a number of friends that would be willing to check on the place for me. I could even throw some money to them (would be cheaper and better use of time than driving 4 hours).
- Oilfield activity is picking up around this city in WY with news of thousands of wells being drilled in the area. I spoke to 3 realtors who told me there are wait lists for rentals.
- I have never owned a rental but would like to diversify as all our money is in the market.
- Could rent property for $1,000/month easily, possibly up to $1,300 or $1,400/month
- Property tax is $600 per year, insurance also $600ish. No state tax in WY.
- ROI if purchased in cash outright = 8.64% on low side , 11.52% high side, I think realistically around 9.5% to 10%. Don't really want to tie up the cash but have it.
- Could get loan at 5.2% with 25% down. ROI:
Rental Rev 12,000
RE Tax (600)
Ins (600)
Int Exp on $93,750 @ 5.2% = ($4,875)
Net Income $5,925
Cap invest $31,250
ROI = 18.96%
I need to find out what closing costs would be for the loan...that is of course not factored in.
Downside: Renting to oilfield service guys is going to be messy. There is a real chance they would trash the place. Would do background and credit check, first and last months deposit. Thoughts?
My personal financial situation since that's always a factor in these discussions:
Married 34 and 36 years old. 2 young kids.
Assets:
401k accounts $625,000
Inherited IRA (held in my name only) $541,000
Roth IRAs $41,000
Inherited Taxable (held in my name only) $450,000
Joint Investment account $232,000
FMV primary res $420,000
Total Assets: $2,309,000
Liabilities:
Mortgage @ 4.1% ($130,000)
Car Loan @2.2% ($7,000)
Total Liabilities: ($137,000)
Net Worth: $2,172,000
- Would purchase property with my inherited funds in my name only to avoid co-mingling with husband. Relationship is good and stable but don't want to co-mingle.
- We will be upgrading our house in approximately 18 months so will need some cash. If I purchase this rental I think it would be best to get a loan. Thoughts?
- My mom owns a similar townhouse half a mile away from townhouse I'm looking at and will be selling in about 12-14 months to move closer to us. Assuming the first rental went well, I would buy my mom's property as well.
