Author Topic: New rental - does this seem like a good idea?  (Read 705 times)

ducky19

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New rental - does this seem like a good idea?
« on: March 08, 2017, 07:21:24 PM »
So we found a cute little two bedroom just a few blocks away from our home that we're considering buying. It's a foreclosure and they are asking $42,800. We are planning on going with a cash offer of $40k and estimate we will need to put about $10k into it before renting it. Renovations should take less than two months. Here are the numbers:

Purchase Price: $40,000
Renovations: $10,000
Monthly Rent: $800
Taxes & Insurance: $1650/yr
Maintenance & Vacancy@20%: $1920/yr
Cashflow after Expenses: $6030
Annual ROI: 12%

Does anyone see an issue with these figures? Does this seem like a good deal? We live in a small town and should have no issues renting it. We could probably get $850-$900/mo, but would prefer to be able to be selective when choosing tenants. Any feedback is appreciated!

Letj

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Re: New rental - does this seem like a good idea?
« Reply #1 on: March 08, 2017, 07:53:46 PM »
It's a good deal and your numbers are similar to the numbers I look at when buying rentals. I look for monthly rent at least 2% of the total acquisition cost.  You're pretty close to that so you can't go wrong on this providing that you get good long term tenants who would not destroy your property.

SwordGuy

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Re: New rental - does this seem like a good idea?
« Reply #2 on: March 08, 2017, 08:17:41 PM »
Does "Expenses" include vacancy and repair set-asides or property management expenses?

But yes, unless those are horribly high, I would say go for it if you are sure the numbers are right.


ducky19

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Re: New rental - does this seem like a good idea?
« Reply #3 on: March 08, 2017, 08:40:25 PM »
We will manage the property ourselves, so the expenses include taxes, insurance, 10% vacancy, and 10% maintenance. Thanks for the input - seemed like a good deal to me, but it is good to get additional insight!

waltworks

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Re: New rental - does this seem like a good idea?
« Reply #4 on: March 09, 2017, 01:03:30 PM »
Do it.

-W

ducky19

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Re: New rental - does this seem like a good idea?
« Reply #5 on: March 20, 2017, 10:29:30 AM »
Just got word from the realtor today - the bank accepted our offer! Now, excuse me while I go clean myself up....

;)

Blindsquirrel

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Re: New rental - does this seem like a good idea?
« Reply #6 on: March 20, 2017, 05:31:55 PM »
   Good for you! biggerpockets.com is a wealth of info just so you know. Good luck!
Even a blind squirrel finds a nut once in awhile.

ducky19

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Re: New rental - does this seem like a good idea?
« Reply #7 on: March 20, 2017, 06:21:57 PM »
Thanks, I'm lucky to have a father-in-law with around 20-25 rentals to pepper with questions, but I'm always open to learning more! Will check it out!

thedayisbrave

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Re: New rental - does this seem like a good idea?
« Reply #8 on: March 21, 2017, 06:14:04 AM »
Awesome!! Those numbers are decent. 
“It is good to have an end to journey toward; but it is the journey that matters, in the end.” -Ernest Hemingway