Would You Do This Deal on a SF Buy/Hold?....

Question

2 bedrooms, 2 bathrooms.

Purchase Price:

$50,000.00

Purchase Closing Costs:

$1,500.00

Estimated Repairs:

$5,000.00

Total Project Cost:

$56,500.00

After Repair Value:

$85,000.00

Down Payment:

$12,500.00

Loan Amount:

$37,500.00

Loan Points:

$750.00

Loan Fees:

$1,600.00

Amortized Over:

30 years

Loan Interest Rate:

4.75%

Monthly P&I:

$195.62

Total Cash Needed By Borrower:

$21,350.00

Monthly Income: $750.00

Monthly Expenses: $552.37

Monthly Cashflow: $197.63

Pro Forma Cap Rate: 8.35%

NOI: $4,719.00

Total Cash Needed: $21,350.00

Cash on Cash ROI: 11.11%

Purchase Cap Rate: 9.44%

Total operating expenses:

$356.75

Mortgage expenses:

$195.62

Vacancy:

$60.00

Repairs:

$60.00

CapEx:

$60.00

Insurance:

$85.00

Management:

$60.00

P&I:

$195.62

Property Taxes:

$31.75

Financial Info

Income-Expense Ratio (2% Rule): 1.33%

Total Initial Equity: $47,500.00

Typical Cap Rate: 8.00%

Gross Rent Multiplier: 5.56

Debt Coverage Ratio: 2.01%

ARV based on Cap Rate: $58,987.50

Bogdan Cirlig · Answer

I never do deals without knowledge of local market situation, crime vacancy and trends. Check foreclosure notices trend on that block as well.

Back to numbers, that cushion for monthly cash flow is so small that just to fix a broken AC will completely blow this deal out of the water. Deal is "floating" but on thin cover.

Would You Do This Deal on a SF Buy/Hold?....

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