Duplex Analysis - Seeking The Elusive First Property!
Hey BP, I'm currently trying to break into the REI world. Could anyone offer any tips or a second opinion about this property? Any advice/critiques of my analysis would be greatly appreciated.
I might need a magnify glass to read your analysis :)
I'm happy to take a look but can you post it bigger? I can't zoom in on it.
@Ryan York can't read it
Sorry about that all. I assumed it would let you enlarge the image. I had to split up the spreadsheet to make it readable. Here is the top portion. Still might need those glasses :)
Bottom portion...
That's still really small... I might just have to do this the long way.
Purchase price: 70k
DP: 14k
Loan: 56k at 5% over 30 years
Two units rented out at 700 each.
NOI: $6975
Annual Cash Flow: $3375
Return on Investment w/ Appreciation (assumed 1% for appreciation): 32.56%
CoC: 24.11%
CAP: 9.96%
The one thing I really struggle with is the upfront repairs. The duplex doesn't need much as far as deferred maintenance goes, however, it has a 30 year HVAC which I would plan on replacing.
When calculating up front repairs such as paint, the HVAC in this case, say new carpet, would you consider that as an upfront expense like your down payment? I would think this would affect your cash on cash return since I would have to come out of pocket right away to fix these things.
@Ryan York HVAC, carpet, heating systems are under CapEx I allow 10% of gross scheduled income for this . Property management allow 10%, maintenance allow 5%
Be aware that units that have 1 bedroom ave a greater vacancey rate I would go with 7 to 10%
Best of luck
Steve
@Steve Smith Thanks for looking.
@Michael H. @Jeb Brilliant Take a look again if you don't mind!
Originally posted by @Ryan York:..."When calculating up front repairs such as paint, the HVAC in this case, say new carpet, would you consider that as an upfront expense like your down payment? I would think this would affect your cash on cash return since I would have to come out of pocket right away to fix these things".
Yes, you should add any needed upfront repair costs to your initial outlay, which WILL affect your CoC. Got to be real about it! Cheers...
YOU ASK:
"When calculating up front repairs such as paint, the HVAC in this case, say new carpet, would you consider that as an upfront expense like your down payment? I would think this would affect your cash on cash return since I would have to come out of pocket right away to fix these things."
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We always add the upfront repairs that I call Renovation costs to the price of the house. So if the house cost $70,000 and my renovation costs are $20,000 the house cost me *$90.000. If that $20,000 is not part of the financing (as in BRRR) then it also is part of your down payment. It's not a future repair under your capex set aside its something you have to do immediatly to rent or sell the house. You still have to figure cappex every month to cover for your roof and systems and appliances.
@Barbara G. @Brent Coombs Thanks for replies.