Wife wants me to buy her Grandparents' home to rent after 1 yr..
It's a family home in Richmond, Va that was purchased and renovated from a tax sale. This would be our 1st home, but we'd be relocating in 1 year. Below are the rental calculations I've come up with. Before I break the news to my wife, if ANYBODY can tell me how this ISN'T an ABYSMAL deal I'd greatly appreciate it, thanks!!!
Monthly Income: Monthly Expenses: Monthly Cash Flow: Pro Forma Cap Rate:
$1,550.00 $2,248.06 -$698.06 2.35%
NOI Total Cash Needed Cash on Cash ROI Purchase Cap Rate
$8,124.00 $20,349.00 -41.17% 2.35%
======Financial Projections========
Total Initial Equity: -$334,650.00
Gross Rent Multiplier: 18.55
Income-Expense Ratio (2% Rule): 0.44%
Typical Cap Rate: 2.35% Debt Coverage Ratio: 0.49
ARV based on Cap Rate: $345,000.00
=======50% Rule Cash Flow Estimates=======
Total Monthly Income: $1,550.00
x50% for Expenses: $775.00
Monthly Payment/Interest Payment: $1,375.06
Total Monthly Cash Flow using 50% Rule: -$600.06
========Analysis Over Time==========
Annual Growth Assumptions
3% 2% 3.4%
Expenses Income Property Value
_______________________________________
Year 5
Total Annual Income $20,536
Total Annual Expenses $28,645
Total Annual Cashflow -$8,109
Cash on Cash ROI -39.85%
Property Value $407,776
Equity $111,347
Loan Balance $296,429
Total Profit if Sold $49,939
Annualized Total Return 28%