“Is it a good idea to spend $7,500 down plus $6,000 closing costs, plus $5,000 for initial repairs, and then rent to section-8 low income tenant, in order to get a few hundred dollars a month?”
I certainly hope you’re not out trolling here in CREOnline.
Certainly your deal is by no means a great deal as your cash-on-cash return isn’t much to speak of here.
$18,500 out of pocket - and you even think that this deal should be considered? Please…you’ve got to be kidding - or in need of some serious financial therapy.
What is your ultimate goal? Hold, appreciate and sell? Is there any value to this property going in? What’s the FMV? How much is your Net Monthly Cash-Flow? If you sold the property tomorrow would you recoup your out-of-pocket expenses?
Once you answer these questions faithfully, you’ll know the truth when you see it.
Recently I found Fannie foreclosed properties, 1family homes. Fannie has a program and finances to investors at 7.5% 30yrs fixed, with a 15% down payment.
Is it good to look into those properties? especially if Fannie’s listing broker is willing to take a note for his commission at the closing? (Broker already agreed to it).
I did a quickie-analysis of a couple properties and they showed that they have a couple of hundred dollars a month in positive cash flow, or break even at worse case scenario.
These are the figures:
Purchase: $50,000
Down: $7500 or 15% of price
Loan backed by Fannie at: $42500 for 30yr/F at 7.5%
appr. $300 monthly P&I
With tax & ins. is appr.
$450 per month.
Broker swears that homes rent for minimum $800 a month.
We have a confortable positive cash flow.
Is it a good idea to spend $7,500 down plus $6,000 closing costs, plus $5,000 for initial repairs, and then rent to section-8 low income tenant, in order to get a few hundred dollars a month?
Please respond!
Posted by Mark (SDCA) on October 19, 1998 at 17:23:45:
Why in the world do you have 6K in closing costs?? Are you paying a lot of points? That is better than 10% which means you are into this deal for “25% down”. Not good.
George: I wouldn’t pay $6,000 in closing costs if they flew me to Greece on the Concorde for the closing. Also, Piper’s right about that rental. Might be pie in the sky. Sounds like you’re paying retail+ for this deal.
I would be surprised if this house rents for $800. But one thing that I wouldn’t do is take the broker’s word for it. I would pick the phone and check some rents in the area. Again, it’s unlikely.