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The Money Mustache Community
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New rental - does this seem like a good idea?
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Topic: New rental - does this seem like a good idea? (Read 2177 times)
ducky19
Pencil Stache
Posts: 765
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!
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Letj
Bristles
Posts: 415
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.
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SwordGuy
Walrus Stache
Posts: 8967
Location: Fayetteville, NC
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.
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ducky19
Pencil Stache
Posts: 765
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!
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waltworks
Walrus Stache
Posts: 5659
Re: New rental - does this seem like a good idea?
«
Reply #4 on:
March 09, 2017, 01:03:30 PM »
Do it.
-W
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ducky19
Pencil Stache
Posts: 765
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....
;)
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Blindsquirrel
Pencil Stache
Posts: 690
Age: 6
Location: Flyover country
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!
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ducky19
Pencil Stache
Posts: 765
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!
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thedayisbrave
Pencil Stache
Posts: 700
Location: Raleigh, NC
CFO @ My Life
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.
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New rental - does this seem like a good idea?