I am new to rentals and I am trying to analyse a property. Help!

7 Replies

Hello everyone, David here.  I am new to rental properties and I could use some advise on how you figure out if a property is going to make money or not?  I am quite sure I am missing something and I am sure what I think looks real good, might not be that good after all.

I would like to run something by everyone and see if I can get some input.  Once I see how others do it, I will be able to figure it out.  I am sure there are plenty of different ways and I am interested in hearing about them.  Then finding a private lender, partner or financing.  

Here is the property I am looking at. It is a 2bd, 2 bth condo around 1134 sq ft. It is a concrete block building built in 1984. It is well maintained and has a $230 monthly HOA fee. The property is kept in nice shape with the pool and club house located down by the private lake and has a nice view of it. Plus there is a dock with benches. The condo is centrally located and close to the local college and LegoLand. It is about 45 to an hour from Tampa or Orlando. I think I could pick up the property for about $42k to $45k. The expected rental price is around $850 to $950 a month. Taxes about $560 a year and insurance around $800 a year. The condo is in good condition and needs minimum work to get it ready.

With that information, could you do a good analysis of the property?   I said I was new to rentals and make sure I put good deals in front of lenders.  I do use a property management company for that reason.  So I better figure that in there.  See I knew I was missing something. LOL  Thank you for your help!

Next question will be on property management companies and their fee's?  What is the standard?  Thanks for your help everyone!

David

Hi @David McBrayer

I would say that your rental would not make you money. It is very difficult to purchase a condo and have it cashflow. Though your insurance estimate seems rather high. An all cash purchase may make sense here, if you want but it would still be low return on capital. 

Purchase Price: 45,000
Down Payment: 9000
Repairs: 0
Rent Rate: 800
Mortgage: ($176.47)
Taxes: -560
Estimated Insurance: -800
Management: -80
Vacancy: -64
Maintenance: -290
Cap Ex: -56
Cash Flow: 20.19332
Cash on Cash Returns: 0.026924
Cap Rate: 0.052444
Appreciation: 46391

Thank you @Doug Merriott,  I knew there was more to it.  I will take some time to look at what you came up with there.  I thought about a cash deal.  I would plan on holding it for a while.  Like take it to the grave with me. LOL.  My thought was, and by looking at your reply, it is all wrong, but I sort of thought at $42k or $45k and it being concrete block that is ran well, it would be easy to rent out as it is in a good location.  The size of them is nice.  OH it has split floor plan on the bedrooms.  All our other properties are free and clear.

I think the cash deal would be the way to go on this.  I would like to pay on something  to improve my credit.  I have paid cash for so long my credit is hurting from it.  They say pay someone. LOL

Thank you for your advise.  I will look into your formula.  Keep up the great work!!!

David

I agree it doesn't sound like much of a deal

Agree with @Doug Merriott, it is very difficult to cashflow with condo due to HOA fee. Unless this town is growing like crazy and/or you just need to park cash, it is usually not that great of a deal.

Thank you @Che Chiu Wong and @Jeremy Gunn for the info. I did notice the HOA ate up the profits mighty quick. Thank you everyone for the advise. I see a got a whole lot more homework to do. Keep up the great work everyone. Self education is the best form of education.

David

There was a really good post here not too long ago about condos.

Long story short it's tough to make them work and the HOA fees will go up over time which eats into your cashflow.

Just think if you got a house for a little bit more with no HOA fees. It would really cash flow.

$40,500 cash and now it is mine.  So no payments and $850 to $900 rent.   Paint is all it needs.  New A/C, new Water Heater, New Washer, New Stove, new bathroom fixtures and concrete block construction.  with two patio's.  One screened and one not.  I am sorry, but for $40k, I could not say no to it.

The one across the courtyard is selling for $55k.  The unit I bought is from a family having to part with it due to a death in the family or moving them into an assisted living facility.  So they needed to get rid of it pretty fast.  Cash was the answer.   The units come with a split floor plan.  Well maintained with security cameras posted around the grounds.  

I was not looking to hit a home run but make a solid investment that if I really had to I could flip and get my money back pretty quick.  Or turn over to a nephew who just turned 21 and just got a nice job.  It would be a nice starter unit.  Repairs should be a minimum for a few years, not a whole lot should go wrong with concrete block construction.  Unless it is real bad.  It is older so the settling should of happened already and it is pretty nice on the inside.

Insurance will be $449 a year.  Taxes will probably be around $400 to $600 with no HSE.  I know the housing and condo market has changed but it was once valued twice as much as what I paid for it.  Again, I was looking for something solid that would not cost me a lot of money.  A house you have to take care of everything and must set money back for it.   Where here,  most of it is figured into the monthly maintenance. 

I guess time will tell right?  Thank you everyone for all your input.  It has been great and helpful.  Lake Buckeye Condo Unit B1

Take Care,

David.

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