Do you tell friends when they are buying a terrible deal?
I know I can't tell the future and I'm not a particularly seasoned investor, but I can do math. For context, I own 7 rentals in my market.
My wife has a friend who got money from a divorce a few years ago, her ex husband had a rental that he owned from prior to their relationship and it has done terrific.
She has never owned anything herself and wanted to pull the trigger on a property. A few days after making this decision she found a property....
It's a 1/1 condo for $200k+ and she's putting $10k down. It has an HOA of $325/mo, taxes at $100, insurance at $50. She's planning on using a PM.
They are under contract and she reached out to us for a referral for an inspector, which I gave her. I knew right away it was going to be a terrible deal but I'm also happy for her for wanting to do this.
I looked up the rental comps and she'll be lucky to get $1450 a month. It is a REALLY nice area though. My wife asked her if she wanted me to go over the numbers with her but she declined. At which point, I feel like we did our part. I don't want to kill her hope or have her resent us or regret purchasing it. I think people learn more from going through things.
That being said, I showed my wife that she's likely going to lose about $500-600/mo before ever having to fix anything or replace a tenant or pay a months rent to the PM. She's a teacher....
So my wife feels terrible and wants to talk her out of it, but I told her to just offer her support, or maybe compliment her and ask what she calculated for rent (hoping that might help her look at the actual numbers).
What would you do?