What's my real profit?

Question

I am considering putting an offer in on a duplex.  The financials are as follows:

Rent charged $1400 total

Mortgage(land contract monthly payment) $300

Taxes $109

Insurance $72

Mgt Co $120

Utilities (landlord pays one side of utilities) $200

Maintenance $140

Vacancy $140

Cost to payback my $ back to me for down payment $231

Total cost of $1312 each month

That means I'll make $88 a month if everything goes as planned (which it won't)   My question is what am I missing here.  The cost of the land contract monthly payment is only $300 per month and rent is essentially  $1200 because 200 covers utilities.  so that is a $900 difference.  I feel like I'm not using a correct assumption with something.  Any guidance would be helpful.  TIA  Chuck

Ned Carey · Answer

@Chuck Astleford

Paying yourself back is part of your return.

Chuck Astleford · Answer

@Scott Passman  I see that I did small calculation error.  the 231 is actually 191.  This is to repay myself over the next 5 years for the money I put into the deal.  I was struggling with if this was part of my return since I felt I needed to repay myself for the cost of investing.  Thank you for letting me know the other numbers seem realistic.

@Ned Carey thank you.  that makes sense.  I was struggling with how to categorize that money coming back to me as it will be replenishing the money I used to put down.

Scott Passman · Answer

@Chuck Astleford Well the first thing that jumps out to me is losing $231/month for paying back money borrowed for a down payment.   How long will it take to pay that back? Once that initial loan is repaid it bumps your cashflow to ~$310/month which sounds about right. The rest of your numbers seem budgeted realistically, so based on what you provided that $231/month is what's dragging down the cash potential in the deal.