Updated about 6 hours ago on . Most recent reply
Just ran the numbers on potentially my first deal - What would you do?
Hello. I'm a newbie investor with minimal experience analyzing deals.
My agent sent me this one off-market deal yesterday and sort of got me fired up about its potential. However, I underwrote it quite conservatively and it has around -150 a month in cash flow.
Could you guys please take a look at how I underwrote it and tell me if you think I did everything properly?
1. The purchase price is around $210,000. It's a 1,000 sq ft 2BR/1Bath that has about 700 sq ft in basement space that could be converted into an extra bedroom and bathroom. I put in a conservative estimate of $50,000 for the rehab. It's ARV, based on similar comps in the area (I did this myself on ChatGPT), would be around $330,000-$340,000. I set it at $335,000.
2. A conservative estimate for the annual maintenance and repairs would be around $2,500 and annual CapEx comes out to around $1,117
- I used ChatGPT to help me with this part. It took into account the new roof and HVAC and gave me a 30-year budget estimate and annualized the costs.
-
| Expense Item | Schedule | Cost per Event | Total 30‑Yr Cost |
|---|---|---|---|
| Roof Replacement | Year 30 | ~$11,000 | 11,000 |
| HVAC Unit Replacement | Year 15 | ~$7,500 | 7,500 |
| Water Heater Replacements (2 cycles) | Years 10 & 20 | ~$2,000 ×2 | 4,000 |
| Flooring/Interior Cycle (2×) | Years 15 & 30 | ~$3,000 ×2 | 6,000 |
| Major Systems Update | Year 20 | ~$5,000 | 5,000 |
| Routine Annual Repairs & Maintenance | Every Year (30 yrs) | ~$2,500 × 30 | 75,000 |
| Total Over 30 Years | $108,500 |
Property taxes would be $490
Insurance would be $2,100
Property management would be 10% of rent which is conservatively estimated at $1,900 post-rehab, so $190 per month and $2,280 annualized
I'd likely pay around $25 a month for garbage, so $300 annualized
I assumed a new tenant every 3 years since it will likely be a family rental, so I estimated $63 a month leasing fee budget.
Improvements would run me around $40,000-$50,000 so I put it in as a $50,000 budget
I assumed a 20% down payment on the purchase price at a 6.85% interest rate.
Overall, it came out at around -$110 in cashflow. Despite it's negative cash flow, considering the rehab budget and ARV, I am still considering other ptions for the property. However, even if I were to flip it, I'd prefer the have a good exit strategy should I be stuck with the property for whatever reason. If things went sideways and I was stuck with the property, I'd be down $110 a month just hold onto it.
Any help would be greatly appreciated!
Most Popular Reply
One quick note, and I'm not trying to be a jerk by saying this...stop relying on ChatGPT to analyze deals for you. Let me give you an example. We financed a flip for a client recently. His first contractor walked off the job and he got another one. The new contractor sent him a contract with what he thought was a detailed scope of work. Instead of hiring a pro to review it, he uploaded it into ChatGPT and it left out tons of stuff including cabinetry and exterior paint. He signed the contract based on the "brilliance" that ChatGPT brings to the table. Now, we're scrambling to help him fix it. Sometimes in an attempt to save money, someone will turn to ChatGPT or post a detailed post on BP to have the peanut gallery make a make a massive, life-altering decision. Remember the saying "If you think it's expensive to hire a professional, wait until you hire an amateur." I know you're looking for inexpensive advice by using AI or posting it on a social media page, but what you posted was way, way too complex to be trusted to either. I don't want to see you lose your shirt.