Please help me analyze this deal

7 Replies

it's a 3-plex in an A area. asking price 233,000 . 

rents: 1) 1000.00   2) 750.00   3 ) 750.00

exp: taxes 6587.00   insurance 1675.   water 1,100 . 

tenants pay all except water.

i would put 25% down, leaving me a monthly payment of about  $1,200 (?) plus expenses above. I think i can make $200 a month, but please feel free to correct me---thanks! 

Taxes are $6587.00 !!!!!!!!!  WOW.  

Any way to improve rents? Any way to add value? 

@Marci Stein    good rule of thumb is 50% which includes reserves and PM... so on the surface over time this is

probably a break even property which is pretty common for A class.. you are banking on appreciation and your tenants paying down your mortgage so you create equity every month. there is nothing wrong with breaking even on A class and having your tenants pay your mortgage.

You will have maintenance/capital reserves of $2,500s-4,000, management of about $4,000 + vacancy of about $1,500.  If you can break even with the added expenses you will be making over 10% on your money.

Good Luck.

Bill

@Marci Stein   Hi Marci

Here's the numbers I ran using the Real Estate Calculator which is an android app.

I assumed you will be using a property manager. You should be able to clear +200 plus a month.

@Jay Hinrichs   I agree. If this is a class A property, there's nothing wrong with breaking even. In your case Marci, you're cash flow positive and if you decided to manage it yourself your cash flow would be much higher.

Purchase Details
--------------------
Purchase Price = 233,000
Closing Costs = 6,900
Renovations = 0
Lawyer = 0
Misc = 0
Down Payment ($) = 58,250
Down Payment (%) = 25
Interest Rate (%) = 4.20
Years = 30

Income (Monthly / Yearly)
------------------------------
Rent = 2,500 / 30,000
Misc = 0 / 0

Expenses (Monthly / Yearly)
------------------------------
Property Tax = 548.92 / 6,587
Association Fee = 0 / 0
Broker Fee = 0 / 0
Management Fee = 250 / 3,000
Insurance = 139.58 / 1,675
Water = 91.67 / 1,100
Sewage = 0 / 0
Electricity = 0 / 0
Gas = 0 / 0
Heating = 0 / 0
Repair Estimate = 250 / 3,000
Vacancy Estimate = 125 / 1,500
Office = 0 / 0
Travel = 0 / 0
Accountant = 0 / 0
Misc = 0 / 0

Results
----------
Cash Required = 65,150
Loan Required = 174,750

Monthly
----------
Income = 2,500
Expenses = 1,405.17
Financing = 854.56
Net Income = 240.28

Yearly
----------
Income = 30,000
Expenses = 16,862
Financing = 10,254.69
Net Income = 2,883.31

Capitalization = 5.48%
ROI / COCR = 4.43%

@Jordan T.  I like that breakdown.  What's the name of the app you use?

Wow--impressive ! Thanks for all the help :)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here