1st Deal Analysis Rough Draft. Advice?

1 Reply

Hello all,

I am a first time investor analyzing (and will soon have my agent and a trusted family member walk through/video property) a midwest duplex in a midsize town for a prospective buy and hold investment. Neighborhood and up/down duplex are both C class. I have done my preliminary analysis (I think), and I hope you all can give your insight, point out my shortcomings or omissions in calculations, and generally remark on how the numbers of the deal appear. 

Please note, I will not be offering full asking price for this property, because ARV won't reach current asking price + rehab cost. Part of my inquiry is, given my closing costs are low (no loan origination fee), in what range should my maximum allowable offer land?

Here is the info:

Tenanted duplex with 2 2br/1ba units, both tenanted and renting for $600 each.

Financing is via private loan at 4% interest only payments and final balloon payment at end of term (5 or 10 years, tbd)

Asking price : 57,900 ***note: following numbers are assuming the seller's asking price, which I would NOT offer***

Est'd ARV: 60,000

Est'd rehab cost: 15,240

Closing/Legal cost : 1,500

Down Payment : 17,000

Total cost of project : 70,400

Total borrowed amount : 53,400

Total Gross income : 15,880

Total Expenses  : 9,054

Net Operating Income : 5,478

Annual Debt Service : 2,136

Cash Flow : 3,342

Even with the over-market asking price, this property is already cash flowing. However, given the high asking price, I would lose an equity building short-term exit strategy. In fact, if I sold too soon, I would undoubtedly lose money. I don't want to have to depend on appreciation, which may or may not happen. 

How much would you offer? Why?

Thanks again, everyone, for your input. I look forward to your responses!

@David Hald Don't spend your 35k and waste your great private money on a deal with that small cash flow. Too many better deals out there. You could lend just your cash, with almost no work, and make that much. Offer that seller way less and move on.