After reading this forum, John Schaub's book (Building Wealth One House at a Time), biggerpockets.com, affordanything.com, and listening to various podcasts, I have decided to include buy and hold rental properties in my FI plan. I like the diversification away from equities, and the potential for higher returns. My wife and I plan to move to a particular rural LCOL area once we FIRE, so I am concentrating on properties there (about 4 hours from my current HCOL location). I would plan to take over management of the properties once I am actually FIRED in the area. I am currently evaluating what would be my first offer on a rental.
Property: Triplex in a small-med rural town. Property values and employment have been stable thanks to a large university in a neighboring town. Built in 1900. Listing only has one exterior photo, so interior conditions are unknown. I assume significant updating will be required.
Asking price: 115k, down from 125k. Has been on the market for 250+ days. Listing describes the seller as 'motivated' but the long time on the market seems to be at odds with that...
Rents: All three units are currently rented for a total of $1500/month. One unit has had the same tenant for 15 years.
Property taxes: $504/yr (low tax area)
Other expenses: Unknown, will assume 50% rule for now. Is it reasonable to ask for a year or two of the books when evaluating a property? We will be using a property manager, yet to be picked out, Does the 50% rule include management? I've not included it below.
Financing: I plan to float the possibility of seller financing w/10% down @ 4-5% interest for 30 years. 5% interest would lead to $560 mortgage payments. As Schaub says, this could be win-win for the right seller.
Cash flow: At asking price, $175/mo. This is a little low for me. If i can get it for 100K this goes up to $252, or $300 for 90k.
Thoughts; worth pursuing? I think the ask is a little steep (not much in the way of triplex comps though, with it being a rural town), but could be a good property it i can get at lower price. If it needs major work, the price would have to drop enough to compensate for me to be interested.