[Calc Review] Help me analyze this deal

1 Reply

Hi Y'all

I'm just beginning my journey on this path, and I'm looking at a property that has certain synergies for me that might make it work. This is my first post on this forum and the attached report is hypothetical in the sense that I need to verify the rental income (any help here would be greatly appreciated). The property is in an unincorporated area, the houses are older and small, but nicely kept with large private yards, and are competing with other much newer rentals close by.


The numbers in the report do not reflect the possibility that, since there is certainly enough room here, I can live on the property in my fifth wheel trailer and self manage. (I have been living in it for over 2 years now, and although I don't want this as a permanent solution, I can tolerate it for a bit longer.) Also, I'm paying for storage of a cargo trailer which I will no longer need to store. These two items alone represent a cost savings to me of approximately $1,400/month.

I'm not sure that what I'm considering is acceptable to the county, but it just might tip the scale in my favor.

All thoughts greatly appreciated.

Mike

View report

*This link comes directly from our calculators, based on information input by the member who posted.

@Michael Riba Assuming that your rental rates are correct, this would be a pass for me. You're already at a negative $242/month cash-flow and looking at your expenses you've definitely underestimated them. Vacancy should be 8% as 8.33% per month gives you one month of rent saved up each year (1/12), CapX and Repairs are definitely way too low at 2%, I'd probably go at least 5% for repairs and 10% for CapX. Just glancing at them, property taxes of 16% look high to me, but I'm not familiar with the area so that could be correct.

I know you mentioned certain "synergies" which help make this a good idea for you, but if you were referring to living in the 5th wheel on the property and getting rid of storing the cargo trailer, well you've already said you don't want to live in the 5th wheel much longer so I can't see that as a long-term win.

Overall, ignoring the underestimated expenses and everything else, you're report basically shows that you'd be spending $180k for a negative return, so unless you're banking on the property appreciating a ton in the future (which based on pg. 2 of the report it doesn't look like) I'd say this is an opportunity you should just pass on, but that's just my opinion.