Real Estate – new offer on short sale

March 6, 2013

I received a call from my rental property manager.  He had a short sale he was working on for 6 months, and wanted to know if I wanted to purchase it.

Truman short sale

The house is a 3 + 1.75, built in 1963.  It is 1,487 square feet.  It has central A/C, a 2 car garage, and a pool.  There are tenants that have been renters for about 18 months, and have a great rental history (meaning they pay on time each month).  Rent is $1,250 a month.  Price is $124,000.  The property is located in California.

My analysis is as follows:

Monthly Income:
Rent = $1,250

Monthly Expenses:
Mortgage = $0 (I would be paying all cash)
Property taxes = $200
Insurance = $50
Gardener = $70
Pool = $85
Property Management = $85

Total expenses = $490

Net income = $760 a month or $9,120 a year

The ROI (return on investment) is 7.35%

I decided to pass on it, mainly because it has a pool.  Pools are great for tenants, but a headache for landlords.  There is the $85/ month pool maintenance charge, plus eventually they require expensive pool equipment repairs, tile work, and more.

If the property did not have the pool, my net each month would be $845/ month, or $10,140 annually.  This works out to a 8.17% return.

I am also not including any repairs that would be needed, as this is an unknown right now.  But after buying over a dozen homes in recent years, repairs will likely run $5,000 to $10,000.  This reduces the return considerably to below 7%.  I always look to get at least 9% for rental houses, after repairs and renovation costs.


Want To Learn More?

To learn more about how Lifetime Investor can help you reach your financial goals, please check out the following resources.

In-Depth Articles


Get My

Learn the secrets the wealthy use to become wealthy in this FREE eBook.  It’s a must for anyone who wants to become financially successful!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.