[Calc Review] Help me analyze this deal
*This link comes directly from our calculators, based on information input by the member who posted.
Hi Folks,
I want to get a second eye on this. Do the expense numbers I have included here make sense? I feel I have over estimated - but I want to be sure.
Thanks
What does the variable expense include? It seems quiet high. Are they maintenance cost?
@Medi Monam, are you sure about your loan terms? Depending on lender, it may be hard to get 80% LTV, particularly if you are going commercial. And 5% interest is probably low.
On the expenses, it really depends on the age and condition of property and area. Generally speaking, I have found lower end areas draw lower end tenants, and lower quality tenants do more "wear and tear" on a property, and roll more frequently. Additionally, older properties will generally need both more repairs and have higher near term capex. I.e. a 20 yr old roof will need replaced in 5 yrs, but also is more likely to need patches. Same with older systems, kitchens, plumbing, etc.
Even if everything is new, I think your reserves are about right, if you are budgeting based on useful life of all items. Again, a new roof will likely cost 8-10k in 25 yrs (assuming a 4-6k cost now). As such, 8k / 25 yrs / 12 mo = $27/mo to have 8k reserved when you need it. Do the same with HVAC, water heater, kitchen and bath remodels, flooring, exterior paint, siding, fences, retaining walls, decks, etc. Some will last a long time, like tuck pointing a chimney (hopefully 50+ yrs) but is also pretty pricey to do when it does come up (and you typically find out you need it because you are getting a leak that took out drywall and insulation).
