Improving Deal Analysis Before My First Property - Feedback Wanted

[Shane Thompson]

Hey everyone, I'm a college student planning to get into real estate investing within the next few years, and I've been trying to take the learning process seriously now so I'm not going in blind later. I'd really appreciate any feedback on how I'm approaching deal analysis and whether I'm thinking about this the right way. 

Right now, I'm not actively buying yet. I'm more focused on practicing underwriting deals and building a solid framework. My goal is to eventually house hack small multifamily properties (2-4 units) in the Philly area or surrounding markets. I've been spending a lot of time familiarizing myself with neighborhoods in both NW Philly (Germantown, Roxborough/Manayunk, Mt. Airy etc.) and NE Philly (Mayfair, Castor Gardens, Fox Chase, Rhawnhurst, Somerton etc.). 

Below is a snapshot of a deal I looked at a few weeks ago in the 19128 zip code. It stood out to me because it appeared to be originally built as a duplex and not converted into one. It also seemed like a good price for the area based on other properties I've seen. 

Strategy: House-hack (post move-out numbers)

Property: Duplex

Unit Mix: 2 bed/1 bath each

Acquisition

• Purchase price: $395,000
• Closing costs: $13,825 (3.5%)
• Downpayment: $61,324 (15%)
• Assuming no initial improvements for this one but I would go into a deal with some reserves built anyway
• Loan Amount: $347,501
• Interest Rate/Term: 6%/30 yr fixed
• PMI Rate: 0.5%
• PITI: 2,838

Income

• Rent per Unit: $1,650 (conservative estimate based on Zillow rent listings for similar units/amenities)
• Total Gross Rent (monthly): $3,300
• Total Gross Rent (annually): $39,600

Operating Assumptions

• Vacancy rate: 6% (based on Zillow listings for nearby similar units sitting for 25-30 days)
• Property Taxes: $5,513 (from property.phila.gov)
• Insurance: $1,800 (rough estimate using ChatGPT)
• Owner-paid utilities: $1,800 (rough estimate using ChatGPT)
• Other annual costs: $1,000 ($500 for commercial trash fees, $500 for misc.)

Reserves

• Maintenance/CapEx: 4,200 (roughly 10-11% of gross rent)
• Vacancy: 2,376 (6% of gross rent, I like to put vacancy as a reserve in my models instead of baking it into EGI)

Key Metrics:

• Gross Income: $39,600
• Total Operating Expenses: $10,113
• Net Operating Income (NOI): $29,487
• Cash Flow (before reserves): 2,748
• Cash Flow (after reserves): (3,828)
• Cash-on-Cash Return (CoC): 4.48%

I'm mainly concerned about investor standards and my approach to acquiring assumptions.

If anyone can speak from their experience, what kind of cash flow or returns are investors with similar strategies actually targeting or accepting right now for deals like this in areas like Manayunk/Roxborough? What about in any of the neighborhoods I mentioned above?

Also, do my rent, reserve, and operating expenses assumptions, as well as my methods of getting to them, seem realistic based on anyone's experience? Are there any other resources I could use to help me get these to be more realistic? I understand that there might be limitations to this based on how early I am in my journey. 

I seriously appreciate anyone who takes the time to read this and provide input. 

[Greg Kasmer]

@Shane Thompson - Numbers look decent. I assume this is a stabilized property with little upside or "value add" potential? I agree with others in that one (you or somebody) could put in an offer ~15% or so and see how that would change your returns. To me this opportunity would be even better if you found that it needs work and you could really get a price discount of 20-25% or so... Good Luck!