The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: ducky19 on March 08, 2017, 07:21:24 PM
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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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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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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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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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Do it.
-W
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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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Good for you! biggerpockets.com is a wealth of info just so you know. Good luck!
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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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Awesome!! Those numbers are decent.