NEW TO THIS!! Good First Investment?

Question

Hello BP! I wanted to start by thanking the community, you guys and girls have been tremendously supportive throughout the entire process.

I came across this duplex in Murfreesboro, TN. The selling price is $259,900. I did a rentometer check for comps in the area and they are renting for around $1,250/mo so my conservative rent is $1,100/mo (this property also has 1 bath while the comps all had 2 baths). I will have to gather more information on the property first as there isn't many pictures of the place and because it's been posted for about a month now. I also used a rental property calculator that gave me a CapRate of 7.84% (this is with a 20% down payment).

If anyone could help me with my analyzation that would be amazing! I want to know that I am doing the steps right so that I don't potentially mess up my first deal D:

Thanks all!!

https://www.zillow.com/homedet... - Zillow Ad

https://www.calculator.net/ren... - Rental Property Calculator

Rhett Kelton · Answer

David,

Glad you are here!  I also live and invest in Murfreesboro.  Several things that I would think about when doing the analysis.  I think it is great that you analyzing with conservative numbers.

1. How much work/money will have to go into the property?  If it will take $40,000, make sure you account  for that .  Also, personally I am extra conservative with this number.  Cost ALWAYS seem to go over.

2. What is your cash on cash return?  I can't know exactly without know what sort of terms you are getting on your 80% mortgage.  (Amortization time is what I look at, then actual length of the loan)

3.  I don't personally look at Cap Rate until it is 5+ units.  With 1-4 units, I personally look at the monthly cash flow.  I usually insist on $100-150 per door minimum, after I take into account all my reserves (Prop Mgmt, Cap ex, Repairs, vacancy.  My monthly reserve is about 30% of rent.  Even if you do the prop mgmt yourself, I would take it into account.  You might decide to stop doing that at some point in the future.)

4.  I imagine you see this around BP a lot, but the deal is really dependent upon your investing strategy.  Buy/Hold, flip, purchase for appreciation, etc.

5.  I would analyze all your rental properties with a 5.5%-6% interest rate.

6.  Develop the relationship with a local bank! I personally use First Vision, but Ascend, Reliant, Synergy also have good reputations.

7.  Come to the REIN meetups.  3rd Wednesday of every month, 12PM, Jim and Nicks.  Talk to some of the investors, mortgage people, and you will get some pretty good ideas and differing opinions.

Best of luck, and hope to see you around!