Working on First Deal - Seeking Input
Hey guys -- So I'm in the process of searching for my first deal. I've been looking at properties for a few months now. I found one that seems like a possible fit, and I'm going back to look at it this evening, as I was unable to get into one of the buildings on the previous trip. I'll give you the story on it:
Looks like the owner was making renovations to the 3 Bedroom SFH, which has been converted from a 2unit - 2BR & 1BR. Some tools are still on site. Tile hasn't been grouted. Still a good amount of work to be done, which is great, because I'm handy and have the capability to finish this space. One potential major concern is the floor. There are some serious high and low spots, the floor is not level. I plan on getting my contractor in there to take a look this weekend. With that said, the one 2 unit that I was able to see was it good shape. Just refinished. Nice space. Well maintained. Like I said, I'll be seeing the other 2 unit tonight.
The parcel is a 5 unit (used to be 6 unit), made up of 3 separate buildings, listed for $149K, has been on the market for 1.5 years, and has not been marketed well at all. Started at $205K:
Bldg 1 - 3 Bedroom/2 Bath SFH. This used to be a 2 unit.
Bldg 2 - 2 1 Bedroom/1 Bath Apt.
Bldg 3 - 2 1 Bedroom/1 Bath apt.
Bldg 1 needs work.
3 of the 4 1BR are rented, and are getting $600/month.
Here's how I figured the numbers:
Unit 1 - $1,100/month
Units 2-5 - $600/month
| Mortgage | $750 | 12 | $9,000 |
| LOC Interest | $400 | 12 | $4,800 |
| Taxes | $3,000 | 1 | $3,000 |
| Insurance | $1,500 | 1 | $1,500 |
| Vacancy | $5,042 | 1 | $5,042 |
| Repairs | $125 | 12 | $1,500 |
| CapEx | $100 | 12 | $1,200 |
| Water/Sewer | $175 | 12 | $2,100 |
| Garbage | $50 | 12 | $600 |
| Management | 12 | $0 |
This shows a cash flow of $13,250.
I plan to manage the property myself. I have also included interest on LOC, which, assuming the property appraises out after, would not be included, so about $18,000 cash flow.
I understand this would be a commerical loan 5/1 ARM.
I am expecting to put about 30K into this, would buy for 130K with these calculations for an all in of 160K.
What am I missing?
I understand the likelihood of higher expenses due to multiple buildings. I would imagine my CapEx should be higher, maybe significantly?
Fire away. Thanks in advance.