New to real estate. Analysis help. Maine

9 Replies

I am new to investing. I am 21.  I have some money saved up I want to invest and am interested in real estate. I am searching for pros and cons on multi family or single family. Also new or used since I have some land here I could build on. My home town is growing quite quickly and is turning into quite a tourist hot spot. It also has good rent demand. From what I understand this would be a good location buy in. I have looked at a few just to get my feet wet. This is one that stands out to me. Any advice on any numbers I may have missed would be great. Also If this looks like a decent deal.

The asking price is 135,000 but I have already decided 135,000 would not make sense. I am wondering if 100,000 would. Its a 3 bed 2 bath. finished basement with 2 rooms in the basement listed as bonus and office. It doesn't need any work.

Expenses (monthly)

Taxes= 67              

insurance= 67

HOA= 90

7% vacancy= 77

5% repairs= 55

total= 355

I would like some pros and cons on cash or finance also. I can do cash or finance. But personally don't see the advantage to cash. After going over all the numbers I will get a lot better return on MY money invested if I financed it with 20k down. Correct me if i'm wrong.

expenses with financing (monthly)

Mortgage= 429

total expense + mortgage= 784

Rent (monthly)

Rent=1100 

net cash flow= 745 (if paid in cash)

cap rate= 8.9%

cash on cash= 15% (if financed at 5% with 20k down and 5k closing costs)

This is my first time doing this so any advice would be great. Any numbers i've missed please tell me and if this seems like a good deal. If not why not and what should I look for in the future. Thanks a lot!

@Jacob Knowles welcome to bigger pockets

I would also include a percentage for CapEx for future major expenses (roof, boiler, ac)

And it would be wise to include a percentage for property management even if you manage it your self.

I use 10% for capex and 10% for property management 

It will change your numbers but it will be safer for you

Best of luck

Steve

Thanks for the tip steve. Thats just the stuff im looking for. I will add those in and see what it comes to. Probably wont look quite as tempting with that added in lol. Thanks

Jacob, I also welcome you to Bigger Pockets  where you can get a full education in all things real estate.

The bad news is that you have to spend some time and read, read some more and then read some more.  Spend the weekend reading about rental real estate.  Look at your deal again, crunch the numbers again and determine what happens if you vacancy is 20% instead of 7% (seems low) or if the interest rate you get is 1% or 2% higher.  Think about your exit strategy.  Think about the big items that can be expensive like Steve Smith mentioned.  Assuming the property is in Maine, what about snow plowing and lawn mowing?

There are many very nice and helpful people on this website who have been there, done that and learned from their mistakes.  You too can learn from their mistakes and not make them yourself.  Ask away just like you did in this post.

Good Luck

Thanks a lot Kevin. I have been doing a lot of studying the past few days and plan to continue all weekend. 

@Jacob Knowles

I would suggest reading a blog by Brandon Turner written on September 28 2014 called 

"The Ultimate Guide to Analyzing Rental Property"

You can find it on the Biggerpockets site  just type it in the search the site section at the top of the page

Best of luck

Steve

I will read it Steve. Thanks

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