Hoping to get some feedback in regards to cash on cash and cap rate for a single family investment property I'm looking to purchase. Purchase price of 215K (Currently worth about 230-235K). Total Cash investment is $63,750 (25% down and 10K costs/repairs). Annual Gross Rents is $19,200, Annual Expense is $8750 = NOI is $10,450. Annual debt service is $8689 (3.5%-30 year ($724 P&I). Cash Flow Annually=$1761 There is definitely an opportunity to increase rents by $200/month and the house is in a highly desirable area and I own the property next door as an investment. Current cash on cash is 2.76% and cap rate is 4.86%. Thoughts?
@Paul Sassin , does your "Annual Expense" calculation account for vacancy, cap ex, and repairs? If not, you would have negative cash-flow at current rents.
This does not look like a solid cash-flowing deal to me. Look for monthly rent AT LEAST 1% of purchase price preferably somewhat more than that.
@Kevin Sobilo thanks Kevin! Yes I included all the expenses in my numbers and capital ex was included in initial cash investment...I have 3 other duplex’s. They cash flow much more but are not in this good of a renters area.
@Kevin Sobilo hey Kevin interested to know your thoughts after seeing my last reply.
@Paul Sassin , cap ex isn't just the rehab. If you own a property for 25 years, you will have more cap ex expenses eventually. So, I would add something to the annual expense for that as well.
Whether you view these as acceptable numbers is highly market dependent. In my market I wouldn't even consider a deal like this.
Here is my last completed deal. Purchased a small functional single family home for $20k, rehabbed it for $10k plus some of my own labor. Refinanced out $45k ($15k more than invested) based on a $60k appraised value. Rented for $940 per month. Obviously it cash flows fine and I have no money left in the deal. In fact, I have an extra $15k that I pulled out of the deal (tax free).
That is a hard deal to find especially right now, but that's what I still hope to find more of myself.
You would be investing quite a bit of money for your return, as opposed to me having less than $0 left in my deal and cash flowing well.
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