Thread by @standupagent

I just got this deal in my inbox today
$14000 with a tenant at $650/mo

This 2 bedroom 1 bath house is in St Louis County Mo. I don't see 'em quite this cheap everyday...but it happens.

This is what we call a deep cash flow deal. That's the upside. The downside is they can be costly on turn over (tenant move out) & definitely more work in general. So consider your cost basis to be your sale price plus your first turn. I'll add 50% and make it $22000.

In this case that means calculate your return based on $22000.
This is conservative but not unheard of. The money is in tenant retention. Which brings us back to the upside: If you go in and spend 20% on Maintenance and a few upgrades your tenant may stay long term.

If you are going to play this game you gotta put the right things in place:
1 Be real about your numbers & have funds in place
2 Get a good management plan with a focus on service: keep a paying tenant happy.

The cheap houses come with cheap taxes: only $579/year on this home.
Add management, repairs and insurance...for a quick calculation figure 30% off the top.

I would expect to net around 450/mo. Even based on the worst case scenario of a $22000 cost basis that is a 24.5% capitalization rate. Anything in double digits is 💰
I'll explain Cap Rate further in the next thread.