Author Topic: What do you think SFH rental?  (Read 2549 times)

Le Barbu

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What do you think SFH rental?
« on: April 09, 2015, 11:02:59 AM »
I intend to buy a SFH downtown for 202,500$

It's a 4-bedroom 1-1/2-bathroom on 2 floor built circa 1950

We intend to clean, repaint, remodel the kitchen and update plumbing for +/-5,000$

We think that in this area, 3 bedroom is plenty enough and because the actual main bathroom is tinny outdated, it's a no-brainer to expand it over room #4. This would be 10,000$

I put asside 2,500$ for miscelaneous and safety margin

Buying fees (appraisal, inspection, notary, transfer taxes etc) for a total of 5,000$

Grand total spent 225,000$

Cashdown 20% 45,000$

Expected rent 1,300$/month

Expected monthly expenses including taxes, inssurances, maintenance and mortgage 1,235$

Net cashflow is about 65$/month but capital repayment is 460$/month @ 2.20% variable rate with amortization of 25 years

Do you think it's to much assle for few bucks or it could be a good long term investment?

My exit would be to flip and run away with 10,000$ over 6 month...

I hope you can help!

arebelspy

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Re: What do you think SFH rental?
« Reply #1 on: April 09, 2015, 11:26:44 AM »
Quite a bit under the 1% rule, likely cash flow negative (and that's with a super low variable interest rate, very bad news if/when that adjusts up), and with a very small equity spread, not worth flipping, because if something big comes up you lose money.  Pass.
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Another Reader

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Re: What do you think SFH rental?
« Reply #2 on: April 09, 2015, 11:35:58 AM »
+1  Quick way to lose a lot of money.

jmusic

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Re: What do you think SFH rental?
« Reply #3 on: April 09, 2015, 12:14:19 PM »
Agreed.

Risk = high.
Reward = low.

Not only that, your rehab budget is is either VERY LOW or it's priced for DIY; are you paying yourself a labor rate or working for free? 

waltworks

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Re: What do you think SFH rental?
« Reply #4 on: April 09, 2015, 12:16:14 PM »
Not sure why I need to pile on, but this is a terrible property assuming your goal is to make money.

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Le Barbu

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Re: What do you think SFH rental?
« Reply #5 on: April 09, 2015, 12:46:36 PM »
Good to know what you think, it's the goal of my post. Cashflow is low but I was betting on rehab value and long term appreciation. It's a very good spot but seem to be more like speculation then

Yes, renovation budget is DIY

bruce88

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Re: What do you think SFH rental?
« Reply #6 on: April 13, 2015, 02:21:01 AM »
You seem to be confusing rentals with flips.

If you are investing $45k plus $5k rehab (plus carrying costs, taxes and utilities) for a flip profit of $10,000, you will be working for min. wage most likely.

If you are buying for a rental, look at the cash flow.  1% is a rule of thumb to make the property a "maybe".  The real rule is how much return do you want on your $50k plus fix ups?

Most investors I know won't take less than 10%.

Also, your post seems to imply renting it out for 6 months, then flipping.
I would never put the $$ into a flip then rent it out for 6 months.....you might have to rehab all over again.

Either flip.  Or rent.  Or rent it out long term (5-10 years), rehab again and then flip.  But not 6 months.

arebelspy

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Re: What do you think SFH rental?
« Reply #7 on: April 13, 2015, 07:32:30 AM »
That's a good point Bruce.  I skipped over that, as the numbers are bad both for a rental and for a flip, so it's a clear pass, but you should be planning one or the other.  Having alternate exit strategies is good, of course (i.e. "I'm planning to flip, but if the market goes south, I can rent it out because the numbers are good for both" or "If the market shoots way up and I suddenly need the money I can flip it instead of renting it out, because the numbers are good for both"--obviously not the case here), but you should have a primary goal in mind that you execute 99% of the time.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Le Barbu

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Re: What do you think SFH rental?
« Reply #8 on: April 14, 2015, 02:29:43 PM »
Thank you everyone, numbers were bad, I skipped on this one.

Project was to big, cashflow was to thin for the risk and hassle...

Cheers!