A Townhouse For 10K, How Much Of A Good Deal Is It?
It's a 2 bedroom 1.5 bath town house that I could maybe get for $10k. It will need paint, carpet and a little TLC. It could rent from $350-$450 per month. Tax and insurance shouldn't be more than $600 a year total. I'm am an out of state investor on this one. I will be living in Vegas while the prop is in Indiana? Would you jump on this deal and why?
Let's say you pay cash, and invest another $4K into the paint, carpet, and TLC, and another $1K for the closing/settlement costs. Now you have $15K in the property.
Assuming 100% occupancy, and $400 monthly rent, you are looking at a gross income of $4800 per year. Let's subtract 10% for management, $600 for taxes and insurance, and another 10% for all those little things that always come up like repairs and maybe a vacancy. You now have an annual cash flow of $3240.
At this rate you get all your investment back in 4.62 years. If you like earning a 32% return on your money, this sounds like a winner.
Look for the things that might sour this deal. Here are a few that come to mind:Is the building on leasehold land? How much is the ground rent? How much time is left on the lease?
How much maintenance has been deferred? At what cost to repair? Are there code violations that will prevent you from getting a certificate of occupancy? Is the building condemned?
Will you need a new furnace or a new roof soon? How about appliances... are they working, or will you need to replace them right away?
What is the rental history for this building? Vacancy rate? Tenant turnover rate?
Is the property located in a war zone, high crime area, or next door to a crack house?
Is there a property management company that will take the property? Some might not because the rent is too low for a 10% fee to cover the management overhead involved.
1) is there a home owners association (hoa) and what is the monthly?
2) have you seen the townhouse?
3) have you had your own appraisal
4) have you had an inspectoin
5) have you check for any special hoa assesments.
6) do you know how to screen tenants or are you hiring a profession property manager
7) why is the price so low
Brenda
Thanks for the info.
The price is so low because the location has a depressed market and high foreclosures. This is a bank owned property.
I would be hiring management. The townhouse is in the "hood".
I wouldn't go for this deal, because of the scope of the investment. If you are looking to become richer, then $10K investment yielding $300 cash flow is just a waste of time. How about leveraging $10K to borrow $200K in real estate which you can turn over in a couple of years to double/triple your $10K initial investment.
Just a thought.
Quote:
On 2004-11-20 17:02, bgrossnickle wrote:
1) is there a home owners association (hoa) and what is the monthly?
2) have you seen the townhouse?
3) have you had your own appraisal
4) have you had an inspectoin
5) have you check for any special hoa assesments.
6) do you know how to screen tenants or are you hiring a profession property manager
7) why is the price so low
Brenda
Brenda, I haven't seen the house yet, but will when I go there to visit. I will get appraisal, inspection, ect before making my offer.