Acquiring this property, my numbers...

5 Replies

Hello Biggerpockets community! 

This is my first post, Ill make it short.

This is a 2/1 SF home, needs only a exterior paint job and new carpet, at the end of the current tenants lease. Roof is "good for another 4 years" and my numbers are based on paying the full asking price - (Yes, I will negotiate that)  Would you pursue this property? 

Thanks!

PS Any other KREIA members of out there? (Kentucky Real Estate Investors...)

45,000 @ 5.0, 30 Years
House Per Month  Yearly 
Asking Price $60,000.00
$$ Down  $15,000.00
Repais + Misc cost $10,000.00
Cash Outlay $25,000.00
Gross Rent  $650 $7,150
50% Rule $325.00 $3,900.00
TRUE NOI $325.00 $3,900.00
Debt Service $228 $2,736
CASH FLOW $97.00 $1,164.00
COCR 0.39% 0.04656
CAP RATE 0.005416667 0.065
Payback 0.00388 0.04656
Payoff 288.6597938 24.05498282
CASH FLOW $97.00 $1,500.00
~EQUITY ACRUAL $228.00 $1,800.00
APPRECIATION $50.00 $600.00
TOTAL RETURNN $375.00 $3,900.00
TOTAL ROI 1.50% 16%

From what you have listed this seems like the deal is rather slim. Im calculating a 4% CoC return which would be far too low to reliably cashflow. If you have one bad month where you need to fix something major or had a vacancy you would be underwater. I would pass on this. To make this deal work I would like to buy at less than $20000 and preferably in cash.

If this is an ordinary property I would not want to pay more than 30k, including rehab. If there was something extraordinary about it, like it was lakefront and had 2 extra lots with it that would be different, but then rent would be higher too.

I apologize about the formatting, I copied an pasted from excel - which was nice and neat but after the post the formatting is horrible. 

This was assuming I paid FULL price, if they accepted $40K, then my numbers would be a lot different.

If my cost of money is 5% I would like to make 8% or 3 percentage points above my cost. If rents are $650 per month or $7,800 per year and using the 50% expense ratio that gives me NOI of $3,900. Divide that by .08 and I get $48,750. That is the maximum to pay for property + rehab.

Good Luck.

Bill

Hold down ALT+PRNTSCREEN while inside Excel and crop the image.  Then post your figures here.  Also, drop us a zip code.  It tells a lot about the property to us local investors.

On a SFR I always start backwards and never look at the asking price....

1)If this deal fits 1.5% or better of the 2% rule AND fits my business plan then I am interested
2)What's the house worth After Repair Value (ARV)
     a)I get these using comps on SOLD properties in Zillow?
3)How much are repairs (during a walk through)?
     a)I list it out in Excel, use Lowes or Home Depot pricing
4)Then do the math (ARV - Repairs) * 75% = max purchase price.
5)What will my mortgage payment be?
     a)use online calculator
6)What will it rent for?
     a)look around and check Zillow or craigslist
7)Determine NET INCOME
     a)Rental Income - (mortgage payment + pmi + insurance + $50mo. maintenance for capx) = monthly rental income
8)Generally I am looking for $250 or better here. Just how high depends ont he property. $250-$450 is worthwhile for properties under 100k

Also, add a profile photo! Stay a while.

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