Need help with first Deal Analysis
I've never done deal analysis before and I am very, very new to real estate. I am not considering buying this property, or any other property, for a year or so. However, this is a real property and I wanted to see if the numbers worked out. Please advise!! Thanks BP!
P.S. I would live in one of the units to qualify for FHA loan at 3.5% down and 4.5% interest rates...That's how it works, right? (for calculations sake pretend I don't live here, though)
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The house costs $200,000
I put $7,000 down and take a mortgage for $193,000 at 4.5% interest rate.
At 30 Years Fixed this is $977.90/month
The three units together bring in $4,470/month. (In reality these units are actually already rented out)
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Using the 50% rule for a quick glance,
$4,470 x 50% = $2,235 for expenses and $2,235 to pay the mortgage
$2,235 - $977.90 = $1,257.10 (cash flow)
$1,257.10 / 3 units = $419.03 cash flow / unit
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When I plugged this into the Rental Property Calculator I used these parameters -->
Property Taxes: $7,000
Points/Lender Charges: $0
ARV: $0 (no renovations planned or needed)
Electricity & Heat: $0 (Tenant Responsibility)
Water: $100 (guess)
Trash: $100 (guess)
Property Insurance: $150 (guess)
Vacancy Rate: 5% (guess)
Repairs & Maintenance: 5%
Capital Expenditures: 5%
Management: 10%
Future Assumptions: 2% (For all three)
The Rental Property Calculator gave me expenses of around $3,000/m and cash flow of around $1,200/m, which was around what I got with the 50% rule.
What am I missing? What would you do different? Thoughts? The property has had renters for a long time so I am assuming it is in livable condition with no serious structural/cleanliness issues.
Thanks again, BP.
Casey