Analyzing My First Deal

6 Replies

Noobie from New Jersey here. I am interested in the Allentown area and wanted to get the locals to check my numbers. Lately, I have been checking on Zillow to understand the market and I found this one that looks like an okay deal. I am still getting up to speed on everything, so most likely I am going to pass on this unless this is a home run deal.

Notes:

Listed at 50k and for this purpose, I am assuming I can get the price down to $40k

20k repairs: From the pictures, it seems like everything is in good shape and just needs some touch-up.

$80k ARV: based on what other properties are selling for on Zillow after filtering for similar sq footage and bedrooms

1k rent: Seems like a fair conservative rate 

Property tax: pulled from the county's website

Vacancy/repairs/property manager - Are these amounts standard?

Insurance - I pulled this number out of thin air. What should I be expecting?

Thanks in advance for anyone that takes their time to look through my analysis!

Home in discussion:

https://www.zillow.com/homes/for_sale/Allentown-PA...

"Vacancy/repairs/property manager - Are these amounts standard?"

Depends ; >  Vacancy is different for every market.  5-10% seems typical.  I use %5 in my area.  I use 10% of rents in my calculations for maintenance; just keep in mind that those are going to be "lumpy" expenses.  Property management, as I understand, goes for 8-12% of rents, depending on market and the number of properties under management.  I use %8 in my calculations because I'm pretty sure that I'll be able to get it down that low by the time I decide to have someone else manage for me.

"Insurance - I pulled this number out of thin air. What should I be expecting?"

Depends ; >  I use either $1500 or $2000 in my market for budgetary purposes.  $2000 if it's a very old property (there are a lot of turn-of-the-century houses in my target area) or a very big one.  That being said, insurance may be way lower (I'm only paying about $800 on one) or way higher (e.g. coastal property).  You should be able to get that property insured for under $1500, even built in 1880.

Thanks,

Chaz

Call your insurance agent (or a few insurance companies) and give them the address and ask for a quote. Should be able to get one pretty easily and quickly.

All your other numbers seem pretty realistic.

Water and sewer will have to be in your name, so you will have to decide wether or not you will bill your tenants for it and just pay it and take it into consideration when figuring out rent price.

Has there been a pre-sale inspection done by the city? And if so ask for the report and what it need to pass that inspection.  If the seller will not do the work, you will need to sign a notarized document at closing promising to do the work.  The cost of the inspection is $100. Usually a seller will get the inspection done, unless it's a bank owned property.

How did you eval what this property would rent for?

Thanks for the responses everyone.

Jennifer, I looked at Zillow to see what current 3 bedrooms are renting out for. I actually see alot of units being rented for $1,100 but I used $1k to be conservative. 

Check out the crime too. There are areas in Allentown that are still not safe and it varies street by street. https://www.trulia.com/property/3038594713-447-W-Gordon-St-Allentown-PA-18102

Otherwise the numbers seem to work and reasonable. I would probably lower the rehab cost from what the pictures show. If you can get it to appraise at $80k, you can do a BRRRR!

Was going to mention water/sewer but that already was.  Not sure if you included trash in the number.  I believe trash is 375/year per door (not an issue with this sfh, but good to know either way)

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