Posted by Jim Rayner on March 08, 2000 at 17:03:30:
Before we can structure a deal for financing it needs to be a deal. Based on my cash flow requirements this deal is a non deal matter of fact it would cost me to own it. For rental property to produce at my expected rate of return with a monthly rent of 600 the maximum purchase price could not exceed 41K in good condition. Any required deferred maintenance would be deducted from the 41K and any rental increase potential is not taken into consideration. if i use my handy little formula the monthly rent would have to be 1047 to even begin to justify my interest in a 72K purchase. i would look for a better deal.
I found a 2/1 SF home (zoned for duplex) 1 block away from a university and would like to buy for rental purposes. The property is in good condition and is currently rented to a grad student for $600/month (low rental).
Property is owned free and clear – owner wants to sell since this is his last property in the area. Asking price is $72K (firm – as per his realtor). Realtor says owner will hold a note with a minimum of 20% down.
Got some comp information which showed similar properties selling for $64K - $69K
Not sure how to come up with possible offers or where to turn next. Should I be talking with lenders now to see what they would offer ? Is there any way to structure something that would give me enough to pay the owner cash and possible get something back ? Do I need to get an actual appraisal done now ?
This violates the first rule.
We’re not looking for houses, we’re looking for motivated sellers.
Your seler’s price is higher than the comps. You want one that is much lower.
This guy is motivated, but in the wrong direction!
The second rule is to make money.
80% of 72000 @ 10% for 30yrs = $615/mo
20% of 72000 @ 10% for 15yrs = 155/mo
600(rent) - 770(mortgages) = -$170/mo
This doesn’t take into account any expences in getting the money.
Gotta crunch thouse numbers, dennis