Re: Is this a good deal? - Posted by Cesar
Posted by Cesar on December 23, 1998 at 21:59:26:
The only way to put this into perspective is this:
You say your return will be $1,000 per year.
That’s $83 per month.
You will be putting up $2,175 of your own money.
So far so good. Now:
What happens if an appliance breaks?
What happens if the roof leaks?
What happens if one of your tenants damages something?
What happens if the A/C goes? Or the Heat?
What happens if you have a vacancy?
What happens if…
I think you get the point. Not to say that it’s a BAD deal, but it’s not exactly a GOOD deal either. You say it will be worth $50,000 when it’s fixed up - So what is it worth now? Would you say about $43,500 maybe? So basically you are paying the fair market value (or retail) for the property. I believe that’s what Redline was trying to say about your profit going in> there really isn’t any…
Any one of those items I mentioned above could wipe out ALL the “profit” you would be making on that property, and it could turn into a nightmare.
Just some food for thought. Make sure you use realistic, worst-case numbers when you go into a deal, because as Murphy said - If anything can go wrong, it will. Believe me- my Christmas money is all tied up on a deal that SHOULD have closed over a month ago, but little “situations” keep coming up…