Could be a good deal? Math Game!!

Question

Dear all,

I´m looking for my first deal, I mean a 3bed house around 80m2 in south Spain (El Puerto de Santa María) where i live, 40.000€-70.000€. I would like buy and hold for rent, and the numbers are:

Purchase Price: 59.900€

ARV: 70.000€

Closing cost: 8.000€

Rehab: 2.000€

Annual Taxes: 480€

Down Payment: 30%

Loan Interest: 2.6%

Years: 30

Gross Monthly Rent: 450€

Monthly Insurance: 65€

Other Monthly Exp.: 20

Vacancy: 5%

Rep. And Maintenance 5%

Cap. Ex.: 5%

TOTAL: CASH FLOW= 90€  ROI =7.73%

As I looking for at least 100€ Cash Flow or ROI=10%, I will offer 55.000€, that means Cash Flow= 103€ and ROI= 8.31%

All your comments are wellcome!!

Thanks in advance for your help

Damian Bornes · Answer

Hi guys,

@Erwin Groenendijk my town, is not an university town like Granada, with tons of foreigner students. Maybe it's work as turistic one. But as i will manage the property i think will be better and easier the long term rent by at least one year contract for family from here, than make shorts rentals for tourists.

@Warren Talbot as i told Erwin, i will manage my properties. My numbers will run just with 5 properties using the strategy of buy 1 unit/year for the first 5 years, and in the 6 years to sell the first property that i bought (around 20.000€ profit) before to buy a new one, then you allways have just 5 properties to manage.

I'm learning a lot from you, and my intention is to be the rest of this year just analyzing deals, to know how the market already is, and what to expect from the ROI i could find here in my town compared to others. I wondering to do my first deal next year.

Thank you very much for your comments and wishes.

Warren Talbot · Answer

Hola @Damian Bornes, this looks like a great opportunity. I spent the last weekend walking my target neighborhoods in Granada, looking at pisos and found nothing close to this good of a return. Sounds like a perfect first deal. I say jump in and I'll be cheering for you from the other side of Andalucia.

Will you be doing your own property management or hiring it out? I'd love to hear your experience finding renters and maintaining the property there.

Good luck as you take the leap. If you have any questions or merely want to bounce off ideas feel free to reach out at any time.

Warren

Erwin Groenendijk · Answer

Hi @Damian Bornes, hope you are good!

Ever thought about renting out the apartment (or similar in different locations where it suits better) per room to students or expats/working people?

Don't know if there is a possibility in your town, but that could boost your ROI.

Erwin