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Forums » Real Estate Deal Analysis and Advice » Does This Deal Make any Sense??

Does This Deal Make any Sense?? Subscribe to Does This Deal Make any Sense??

5 posts by 4 users

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Tiara Murray

Wholesaler · Detroit, Michigan


Forum_avatar_avatar-tiara

Icon_minipost Apr 02 '09, 11:43 AM

So I'm running the numbers on a property that I found, and I'm trying to see if they make sense to you guys...

Assumed:
30 Year Fixed Rate @ 7%
Loan Amount: $25,000

Monthly Annually
INCOME

Gross Income $ 850 $ 10,200

Vacancy $ 50 $ 600

Net Income $ 800 $ 9,600

EXPENSES
Property Taxes $ 225.16 $ 2,702

Insurance $ 33 $ 400

Maintenance $ 100 $ 1,200

Net Expenses $ 368.16 $ 4,302

NET OPERATING INCOME $ 5,298

Mortgage $ 166.32 $ 1,995.84

CASH FLOW $3,302.16

Edited: 06/26/2010 at 07:49AM


J Scott

Real Estate Investor · Atlanta, Georgia


Forum_avatar_avatar-jasonscott
Donor

Icon_minipost Apr 02 '09, 12:28 PM

Unfortunately, there's not enough info to determine if this is a good deal or not...

Specifically, without knowing how much cash you put into the deal, there's no way to determine if your ROI is reasonable or not. For example, if you put down 20% on the deal (which would be $5000, with a $25,000 loan), your cash-on-cash return would be 66%, which is great. Of course, if you put down $50,000, your cash-on-cash return would be around 6% -- not very good.

So, that's a big factor.

Also, you're missing a bunch of expenses that I would expect to see. For example:

- Advertising Costs
- Lawn Care
- Termite Inspections/Repair
- Capital Expenses
- Property Management (if you *ever* plan to use one)
- Utilities (during vacancies)
- Administrative
- Accounting
- Legal

Lastly, your vacancy rate is assumed to be under 6%...is this really feasible for this location/property? And does this include rent loss due to things other than vacancy -- for example, concessions or non-payment?

Some things to think about...

Edited: 06/26/2010 at 07:49AM


Tiara Murray

Wholesaler · Detroit, Michigan


Forum_avatar_avatar-tiara

Icon_minipost Apr 02 '09, 12:38 PM

Thanks J, I'll rework the numbers, and add all of those factors..

Edited: 06/26/2010 at 07:49AM


Tom C

Real Estate Investor · Ohio


Forum_avatar_avatar-tc

Icon_minipost Apr 03 '09, 03:24 AM

Tiara,

Don't over think your numbers.
Rent = $850/month
Expenses = $425/month (includes taxes and insurance)
NOI = $425/month
Debt service = $166 (just the P&I payment)
Cash flow = $259

Those taxes are horrible. By time you get done screwing with all the numbers this house will be gone. If it's in good shape get it under contract. Its a great deal.

Edited: 06/26/2010 at 07:49AM


Richard Rabineau

Homeowner · Beverly Hills, California


Forum_avatar_avatar-rabineau

Icon_minipost Apr 05 '09, 09:52 AM

Tiara, what part of Detroit is this in? Sounds like a great deal!

Edited: 06/26/2010 at 07:50AM


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