[Calc Review] Help me analyze this deal
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@Derek Foster where you getting a 4% mortgage. Just looked up interest rates and 30 year fixed was 6.5% Vacancy of 2% is your tenant staying an average of 50 months. Banks will use 5% vacancy for investment property in their underwriting. I use 8% or 1 turnover per year. Did you run a capex budget and it came to $20 per month. Not realistic, Bare bones is $100 per month. Let's assume you put in new floors. Assume 1500 sf of flooring. Check the commercial warranty. Most are 10 years or less. That's you lifespan. My area it is $6 sf to replace. $9000/120 month lifespan=$75 per month for 1 item in a capex budget. Still need to account for roof, appliances, hot water heater, hvac, etc. You did a maintenance budget and it came to $40 a month. I use a minimum of $50 per month. Property taxes will likely go up with that much of renovation.
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- Investor
- Virginia
Quote from @Tim Herman:
@Derek Foster where you getting a 4% mortgage. Just looked up interest rates and 30 year fixed was 6.5% Vacancy of 2% is your tenant staying an average of 50 months. Banks will use 5% vacancy for investment property in their underwriting. I use 8% or 1 turnover per year. Did you run a capex budget and it came to $20 per month. Not realistic, Bare bones is $100 per month. Let's assume you put in new floors. Assume 1500 sf of flooring. Check the commercial warranty. Most are 10 years or less. That's you lifespan. My area it is $6 sf to replace. $9000/120 month lifespan=$75 per month for 1 item in a capex budget. Still need to account for roof, appliances, hot water heater, hvac, etc. You did a maintenance budget and it came to $40 a month. I use a minimum of $50 per month. Property taxes will likely go up with that much of renovation.
I agree. Just HVAC servicing alone is $500/year. I am not sure why everyone uses pie in the sky numbers where there is ZERO upside. There are going to be a lot of investors "swimming naked" as buffet says in the next 24 months because they are buying based off of these types of numbers and realize the cash flow is significantly negative.
