Starting to buy - Are my numbers sound?

3 Replies

Hey Fellow MO Investors:

Wanted to share some specific info in this post as I've been doing analysis and don't want to have my head in the clouds, as I'm out of state. Below you will find a deal analysis that is typical of what I'm finding and buying in KC, MO. The plan is the BRRRR out there. The purchase looks what's below. This is a B/C class Grandview home. Of course, cash flows look great.

PROPERTY INFOCASH FLOW
Rental (AS-IS) ARV$100,000Gross Operating Income$895
Purchase Price$58,000Expenses$332
Rental Rehab Required$7,800Other0
Closing Costs total$2000NOI$563
Cash in deal$22879Debt Service$278
10% Investor Return$191M Cash Flow$285
Cash to complete project$22879Cap Rate6.8%
LTV80%LENDING
Equity After Rehab$32200LTV80%
INCOMEInterest Rate6%
M Rental Income$895Title Fees$600
Other$0Loan Fees+Appraisal$1400
Total$895Loan Amount$46,400
EXPENSES/mAmortization Term30
Mortgage Payment$278Months to stability3
Taxes$80Carrying Costs$1479
Insurance$35Years fixed30
Management$80PITI PAYMENT$393
Vacancy (1 month)$75P&I PAYMENT$278
HOA0
Repairs/Maint (7%)$63
Water/Trash$0
Realized Expenses$393
Other Utilities$0
Total$332

Here are the numbers on a refi which I can do 6 months later, if I want to pull ~$10K out:

LTV80%
Rate6%
Fees$1500.00
Closing Costs$800.00
Loan Amount$80,000


Equity Left in Deal$20,000
New P&I payment$383.71

Expenses$332.07
New Cash Flow$179.22
New CAP RATE6.8%

CONV to REFI LOAN
Cash out/Left in deal$13020.93

This looks like a really good strategy to me - to use my cash, do a deal, pull out the cash (and then some) and continue to roll forward.  So, can you guys tell me what I'm doing wrong if anything?  I have a pretty good manager on the ground and a crew that she's vetted.  Rehabbing one deal right now that seems to be going well.  

Any sage wisdom/words of caution?  Thanks in advance.

@Don Nelson , few questions to think about:

  • What's the nature of the deal? Why do you think you'll be able to add $42k of value for <$8k of renovations?
  • I don't see CapEx in your expenses, have you figured for that?
  • Management will probably be a little higher 10-12%.
  • What about water/sewer?
  • Most lenders will want 25% equity on an investment property. You may get lucky and find one that will go with 20%, but I suggest being conservative.

@Jaysen Medhurst - $42K because that's the market/comp value. We got a nice off-market deal. What do you do for Capex? Our thinking was we pull out cash on the refi and keep ~$3k in reserves for Capex per property. Management is exactly $80 per door. Water/sewer is paid by tenant. My lender allows an 80% LTV on both purchase and refi. Thank you! I appreciate your comments and hope my bases are covered.

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