How does my analysis look?

Question

Hi BP

I'm still a newbie and want to see if my analysis is correct before I move forward so any help is greatly appreciated!

https://www.zillow.com/homedetails/13-Enfield-St-13-Hartford...

Kevin Sobilo · Answer

Ok, a few things you may want to change/correct on your spreadsheet:

1. You did not account for property taxes.

2. In many rentals the landlord pays for some utilities even with a single family unit like this. Utilities provided by the municipality can become liens on the property if unpaid. So, most landlords will pay those and include them in the rent or possibly bill them back to the tenant if they are not flat fee. In my area, the most common are garbage and sewer bills, but they could include just about anything like water, electricity, etc. So, you need to check out how utilities are provided in that municipality.

3. You estimated 10% yearly increases in rent which is CRAZY high! There have been times where a market experiences a jump in rent like that, but it is not reasonable to estimate that level of rent growth. I would estimate 1-5% depending on how I saw the outlook of the market I was in.

4. You estimated insurance at $17 which seems very low to me. I would expect to pay $50-80 in my market possibly more in a more expensive market. So, you might want to check where you got that number from.

A few couple comments about how you are planing this deal:

1. This unit looks uninhabitable? Generally you are not getting 30 year fixed mortgages on vacant uninhabitable properties. You either pay cash or maybe get a hard money loan which is expensive and then refinance when the rehab is done into the long term loan you want.

2. Do you think you could get those loan terms. 6.13% is pretty low right now and you need to search to find a lender who will do small loans under $50 or 75k. Try local community banks and credit unions. You may also need to do a shorter loan at a variable rate to get a small loan like that which will increase your monthly payment.

3. You are only borrowing a small portion of the total money in the deal which leaves a larger amount of equity in the deal. That equity might better be used towards the next deal. So, you may want to refinance out more money which will again increase your monthly payment even more.