What do you think SFH rental?

[Le Barbu]

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We think that in this area, 3 bedroom is plenty enough and because the actual main bathroom is tinny outdated, it's a no-brainer to expand it over room #4.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

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.

[Another Reader]

+1  Quick way to lose a lot of money.

[jmusic]

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]

Not sure why I need to pile on, but this is a terrible property assuming your goal is to make money.

-W

[Le Barbu]

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]

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]

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.

[Le Barbu]

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!