Quitting Your Job Using Rental Properties - Day 51

Day 51 - March 31, 2016

     Yesterday, Angela got a text from Gibo about a house for sale that he wanted us to look at.  The seller is desperate.  It had been on the market for a while.  The original listing price was $110k, then dropped to $85k, and two days ago dropped to $75k.  Gibo's selling points were that it had central A/C, includes appliances, and ready to rent now.  He said he thinks we could get $900-$1000 a month in rent for it.  I researched some similar rental properties in the area, and $900-1000 is about right for this area.
     I ran some numbers on the house, and found it to have a cap rate of 14.7% and a cash on cash return of 21%.  Sounds very good.  The problem that we saw was that the property has an appraisal value of $44k, and the asking price is $75k.  Maybe this is normal, I don't know, but I looked up the appraisal value of my current residence when I bought it on 2009, and it matched very closely with what I paid for it. 
     The house was vacant, and had a combo lock, so Angela, the kids and I stopped by after I got out of work.  First of all, let me say that this house is in a very run down neighborhood.  It is not a place that I would want to live in.  We did see the potential in the house though.  It did need some work.  The floors would have to be completely redone.   The countertops in the kitchen are not in great shape and kind of ugly.  Angela wants to add a dishwasher.  I want to redo the sidewalk in the front of the house that leads to the front door.  On top of this, the type of tenant which this property will attract is not really something that we want to deal with.  All in all, for being the first house that we looked at, I'm excited that it can basically only go up from here. 
     We did find another house online today that we are interested in.  It is in a much nicer neighborhood.  The seller is selling as it for $90k.  The initial value online is around $116k.  I'm pretty sure we could rent it for $1200 or more.  Angela sent Gibo a text last night telling him that we looked at the house he recommended, and that we were interested in looking at this other house.  We'll see how he responds. 
     I'm still very excited and optimistic about quitting my job with rental properties.

Please check out my website for my other side business/hobby. www.yrlenterprises.com and at facebook.com/yrlenterprises