Analyze my first deal

7 Replies

Looking for some advice with my first deal! Thanks in advance!

2 bedroom condo that has been completely remodeled (granite, stainless steal, new carpet, new paint, base boards etc). Purchase price is 38K, would be paying cash. Average rent is $700 for the area but my realtor believes we could obtain a contract at $725 because of the remodel. HOA is $140, includes water, sewer, trash. Annual taxes are $202. I understand this doesn't fit the 1% rule.

So far this sounds like a good deal. Don't forget to incorporate insurance costs. also, will you be managing it yourself or having someone else manage for you?

Robert,

A few things to check into first. Does the HOA limit rental's? Does the building need maintenance which will require the HOA to hit you with a special assessment? Also, is the $38k purchase or purchase & closing cost.

Using your $700/mo for rent number here's what I got

Annual Rent less 10% vacancy= $7560

Less 10% Management=$6800

HOA=$1680

Taxes=$202 (check to see if your taxes will change for non-owner occupied property)

10% reserves/maintenance etc=$680

Positive Cash Flow=$4238

COC/ROI=$4230/$38,000=11%

Hope this helps, can't say if I would take it or not. Depends on the market, your strategy & your willingness do deal with condo HOA's. Personally, I am not a fan of HOA/POA/Condo Associations etc.

Yes, @Damian Baynes   I forgot insurance.  For a single family I pay about $85/month, I would guess that a condo would be about $50.

That changes your COC to $3630 or 9.5%.

managing myself. HOA does not have any rental limits

Looks like if I managed myself cashflow would be $4998 with reserves and vacancy. 

ROI $4998 / 38,000 = 13.15%

Does this look correct?

My orriginal number didn't include insurance. By estimation only I'm calling it $600/yr. ROI/COC=$4398/38,000 = 11.57%

Even though you are paying cash, you will still have some closing cost.  Make sure to factor that in as well.  Unless the $38k includes that.

Otherwise looks pretty good.

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