Written by teh_homepwnerer
Was listening to a guy today talk about a house he was about to buy and needed some advice on whether it would be a good deal. The home had a pool and was going to be on the market for a suspected 30-45 days.
A fellow investor told this guy to not buy the home. Told him that it being a liability due to the cost to maintain a pool could essentially make it a detriment to purchase. Also, the buyer thought that by having a pool he could get another 100 dollars a month rent.
The jest of this story was this:
By having a pool, the owner was looking at about a extra 75-100 dollars maintenance, plus the costs of the home sitting on the market for a extra 30-45 days.
Heres why it was a bad deal.
Rent - $800.00 = income
Pool care - $100.00 = expense
Rent Loss - $120.00 = expense
--------------------------------------------------
Net Rent - $580.00 = total income after expenses
This guy would need a mortgage payment of $580.00 just to break even. But wait! We never calculated in the management fee or property maintenance. This would really lower our net rent income to closer to $490-500.00 a month.
He's losing money cause he couldnt rent the house the same month he put it on the market. Not only that, he thought that by having a pool it would fetch more cash per month. But by him paying the pool maintenance fees and not renting it out right away, he is eating that income.
What both me and the fellow investor thought he should do was pass on this deal, look for something that he could buy at a discount of 50-60% of ARV and make sure he could not only rent it for 5% less than the other houses in the area, but still cash flow!
Theres your 1 minute course on investing.. enjoy.
teh_homepwnerer
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