Deal & Partnership Analysis - Des Moines IOWA
Hey BP, I've been working in PM for over 3 years, handling turnover and acquisitions, and personally have one successful BRRRR under my belt. I have a potential money partner looking to get in on some more rehabs and management deals. I would be responsible for vetting the properties, acting as general contractor for the rehabs, and placing tenants. The biggest hurdle is getting the quantity of deals due to the hot market but I do have access to off market deals with my company that I can leverage with patience. I have two specific questions.
1) The current plan calls for 5K commission per property. I flirted with an equity stake which is a better return in the long run but I plan to leverage the commission to pursue a personal deal. Does this seem like enough of a return for the time and effort required? My gut is telling me no but I also don't want to lose an opportunity. On the flip side if I have an equity stake I would have my employers blessing to self manage which I could potentially leverage.
2) I would love any critiques on the deal outline below. I'm not anticipating a perfect BRRRR and am targeting a $250K AMV single family. I also have an outline for $300K AVM to be flexible with the tight market. The intention would be to refinance in roughly 5 years to purchase additional properties with the equity. We have $300K to invest and based on the figures the funds could be recycled into upwards to 13 properties in a perfect world.
| Initial Purchase | |
| Purchase Price | $200,000.00 |
| Downpayment 20% | $40,000.00 |
| Mortgage Int Rate | 3.75 |
| Taxes | $3,000.00 |
| Insurance | $700.00 |
| Mortgage (PreRefi) | $1,050.00 |
| Rehab Budget | |
| Kitchen Appliances | $4,000.00 |
| Paint Walls, Trim, Doors | $3,500.00 |
| Kitchen Countertops | $2,500.00 |
| Flooring | $3,000.00 |
| Landscaping | $1,000.00 |
| Basement Finishes/Unexpected Projects | $4,000.00 |
| General Electrical/Maintenance | $2,000.00 |
| Mortgage Holdover 1.5 Months | $1,525.00 |
| Utility Holdover 3 Months | $1,000.00 |
| Rental Certification | $200.00 |
| Contractor/Marketing Fee | $5,000.00 |
| Total | $27,725.00 |
| 80% Loan to Value Cash Out Refinance | |
| Purchase Appraisal | $200,000.00 |
| Post Rehab Appraisal | $250,000.00 |
| Refinance Cost | $2,000.00 |
| 20% Cash Out | $50,000.00 |
| Refinance Mortgage | $1,250.00 |
| Initial Investment (Downpayment & Mortgage) | $67,725.00 |
| Remaining Investment in Property | $17,725.00 |
| Equity in Property | $50,000.00 |
| Year 1 Return | |
| Mortgage | $1,250.00 |
| Rent | $1,750.00 |
| Management Fee 10% | $175.00 |
| Monthly Cashflow | $325.00 |
| Yearly Cashflow | $3,900.00 |
| Cash on Cash Return | 22% |
| Year 5 Return | |
| Total Cashflow | $19,500.00 |
| Vacancy (Average 2 Year Lease w/ 3 Week Vacancy) | $3,125.00 |
| Maintenance & Cap X 7.5% | $6,300.00 |
| Cash Profit Estimate | $10,075.00 |
| Loan Balance | $180,154.00 |
| Property Value w/ a Yearly Appraisal Increase 2.5% | $282,852.00 |
| Equity (Loan Balance - Appraisal) | $102,698.00 |