Research the property you selected in your Local Real Estate Opportunities activity.
Using the newspaper listing from your exploration, either go online to the real estate agency that is listing the property or contact the real estate agent to do the following:
Obtain the current asking price.
Ask whether the seller would entertain an offer below the offering price, and if so, what would be a reasonable offer.
Obtain at least three comps for the property in which you are interested. Note. A comp is a property that has recently been sold and is similar to the property you are considering in terms of location, size, and characteristics. Determine the actual selling price for the three comps.
Using the comps, the judgment of the real estate agent, and your personal judgment estimate the amount for which you could purchase the property.
Using mortageprofessor.com or another mortgage calculator, calculate your monthly financing costs (your mortgage) assuming closing costs of 5%, a down payment of 30%, and a 30-year fixed rate mortgage with an interest rate of 6%. Input this financing cost on the attached spreadsheet.
Estimate the current operation costs, including the following:
Insurance
Utilities
Electricity
Gas
Water and sewer
Telephone
Internet
Property taxes
Association dues
Maintenance costs
Refuse removal
Lawn and grounds costs
Other expenses associated with operating or living in the property
Input these costs on the attached spreadsheet.
Complete a Microsoft® Excel® spreadsheet to determine and to tally the total expenses associated with this property. And, compute the following using the spreadsheet. Be sure to provide a narrative summary right on the spreadsheet as to the following questions.
How much would you have to charge in rent to break even each month, assuming the residence is occupied for the entire year?
How much rent you would have to charge to earn a 10% profit.
How much rent you would have to charge to earn a 20% profit.