Need Help with my first deal Analysis

11 Replies

HELP! I am in the negotiation process of my first SFH Rental deal and need a little help/guidance from the BP community. Below are all my numbers and I just want to make sure it is the right deal. The house is in a "B-C" Area but has many upgrades and other features houses in the area do not. I went on the cautious side and put $5,000 for repairs but think that may be a little high. Zillow/Trulia value the house over $70k but I understand that does not mean that I will be able to get that if I were to sell. Thank you for all your help!

Your percentages for your reserves seem reasonable. I'm assuming you're going to have the tenant pay for all the utilities since you only included garbage in the costs. Is this in Cuyahoga or Lorain County? 

You don't want a best house in the bad area. You want a worst house in the really good area. You want your buy to be undervalued.  Taxes seem to be high, at least compared to MN. I Minneapolis I am paying 1100 in taxes on 70k property. Are where special tax assessments? Will seller pay them? I would not pay for garbage.  5k in repairs will replace a door or two, paint & carpet. In the other words seems like house is turn key or very close. That's great, but consider getting a home inspection and / or bring an experienced general contractor or two to look at the property, you don't want to be surprised by discovering place needs a roof and it will cost $10k. All in all doesn't look bad. Thank you, Dan

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As Matt mentioned, if the utilities are paid by the tenant and it's managed by the owner (no property management), I would consider it. 

@Dan Bryskin @Kevin Cross You always pay trash when a tenant moves in. If you don't and they turn out bad you will haul months worth of garbage out. After the first year instead of a rent raise if the tenant ihas kept the property clean you can ask them to put trash in their own name. RR

Originally posted by @Dan Bryskin :

You don't want a best house in the bad area. You want a worst house in the really good area. You want your buy to be undervalued. 

Dan, what he's saying is with the improvements he plans to do it will be the best house in the neighborhood. He's not buying the best house in a bad area.

@Ralph R. I guess paying trash depends on there are you at. Lover 48 may be different then Alaska :) For example in MPLS we have trash and water billed by the city. We use to pay that on premise if tenant doesn't it gets attached to the property. Then we changed things around, and now instead of paying for it 100% of the time we are taking a chance we will get stuck with it at some point of time. Oh and if trash is not paid city will disconnect the water. And in the suburbs not having a trash service will be a lease violation and will result in eviction - never happened to us.  

@Matt Motil Yes I am planning on having the tenants pay for the utilities. The property is in Summit County actually.

@Dan Bryskin I put the taxes that was closest with the MLS listing and on Zillow so if they come in lower then that's even better!

Thanks everyone for the feedback, keep it coming!

@Dan Bryskin  my properties are all in Colorado. One city will not even put water and trash in a tenants name they are all in my name the property manager collects those bills in addition to rent. In another city I just call the water Dept to be sure the tenant has paid up. Usually2 times a year in summer and after the holidays. I also call when we recieve notice from the tenant before we refund the deposit.  If I have to pay it then we take it from the deposit. If they shut the water off I would think that would encourage the tenant to keep the bills paid, trash or water.  In Colorado the owner recieves notice that they are going to place a lien against the property long before they do it   If you have to you just pay the bill. Another indicator that a Lein is coming is the water will already be off. If it's in the lease the tenant pays water and they don't you can evict or bill them. I like to cover the trash the first year because i don't know the tenant and if it's paid then they are more Likley to use the service and it's less clean up costs if they don't work out. R R

Originally posted by @Kevin Pruitt :

HELP! I am in the negotiation process of my first SFH Rental deal and need a little help/guidance from the BP community. Below are all my numbers and I just want to make sure it is the right deal. The house is in a "B-C" Area but has many upgrades and other features houses in the area do not. I went on the cautious side and put $5,000 for repairs but think that may be a little high. Zillow/Trulia value the house over $70k but I understand that does not mean that I will be able to get that if I were to sell. Thank you for all your help!

 Couple of thoughts do you have a bank that will finance a $52,000 purchase?  And with only 15% down?  All my Non-Owner Occ's have been 25% down, which changes a lot of numbers on this property, and while I've never bought anything at that low price, I have heard that it's hard to find traditional financing at that price point. 

And as others pointed out, the margins are too thin for property management another 8-10% puts you at less than $100 cashflow on this property.

@Troy Fisher Yes I already have my pre-approval from the bank. It was not hard at all, I am going through Huntington which is a pretty large national bank. They gave me the option to put down 15% or 20%. Not sure if it is different for ohio but I will definitely take it! I will be managing the property myself so I wont have any property management costs.