Advice on this cost analysis please!

[Quinn Murphy]

Hey guys,

I'm new to the real estate thing but have been reading up and analyzing properties to the point of exhaustion! Anyway, I have one that I think I like (very few meet the criteria it seems) and I was hoping some of you guys can look at the numbers and expense percentages and see if I'm way off the ball or not. Any insight would be appreciated!

https://www.biggerpockets.com/calculators/shared/804435/f1481755-6fbc-4583-a5c4-c2ac1dcd482e

Thanks 

[Mitch Messer]

Hi @Quinn Murphy. Just looked at your numbers. Here are a few observations:

1. If ARV is truly $125K, and you purchase it for $125K, then you're already upside down from Day One. As an investor, you always want some discount off retail (10% minimum) to protect yourself. If you had to sell the day after you closed, you'd have real transaction costs (agent commission, negotiation discount, closing costs), and these need to be accounted for when you buy. Always give yourself an escape route that doesn't wreck you financially.
2. Don't rely on the 50% "Rule" for expenses. You'll want to work up your own numbers using actual data where possible (e.g., taxes, insurance, management) and defensible estimates where hard numbers aren't possible (e.g., vacancy).
3. You have repairs costs set to zero: Not gonna happen. There will always be repairs, even on a brand new house. Just accept that and update your numbers accordingly with a realistic minimum repair expense (perhaps 4% of purchase price).

Hope that's helpful!