Posted by Randy (SD) on December 09, 2004 at 14:15:36:
Yes of course you could put down a $40,000 down payment and make this property cash flow better. But here’s a brain teaser for you, what is your REAL motivation for buying THIS property? Is it because it’s a pretty house, or because of where it is located? This does not appear to me (based on a limited information available) that it is an investor type purchase. You say you don’t live anywhere near Georgia and this is your first property so why this one?
Hi everyone, I am just starting out and have put down a deposit for my
first property in Ringgold, GA at a Marshall Reddick event (it’s a notherern
Georgia town, 15 min from Chattanooga, TN).
Since I don’t live anywhere near Georgia, I have been researching the
property on-line (I know - should’ve done that BEFORE I put down the
deposit …)
It a basic 3Bed/2Bath 1290sqft, 2004 house. The area looks basically sound. Decent schools, bedroom-community
close to a growing city. But, I just figured out, that it’s very close to a
cemetery!
Thing is - this property has a tenant in it already, which makes it
attractive. Is being next to a cemetery a bad thing (poltergiest??) or
a good thing (open space??)
Re: Property close to a cemetery – - Posted by Randy (SD)
Posted by Randy (SD) on December 09, 2004 at 11:56:19:
Ghosts are not your problem… cash flow makes this a loser. Add just a 5% vacancy rate to their numbers and you have only $849 a year positive cash flow, that’s with an interest only loan. Standard amortization on a 30 year fixed at 6.75% makes your PI $744.33 giving you negative cash flow of $343. These assumptions are based on the TOP market rent as they are proposing at $925… PASS.
BTW thanks so much to all who responded to my question. I decided against the house. I called some other local agents, and it did not appear that I can really count on renting that house for $850 (and as Randy pointed out … at $750 it’s bad cashflow … I would speculating on appreciation).
Good move passing on that one. As Randy points out, the cashflow is minimal to negative, even with an interest-only loan. And you really don’t know much about the area, the house, or the property management company. Since the property is out of sate, you’d be dependent on the property manager. If they did a bad job, your property could sit vacant for months, in which case you’d need sufficient cash reserves to cover the mortgage payments. And you’d have to conduct all business over the phone – like firing the property manager and hiring a new one.