AM I MISSING ANYTHING? Please analyze!!!

3 Replies

I am looking to finalize a sales agreement on my first property.  It looks like a good deal as a flip, or rental.  My initial plan is to refi and rent it out.  Here's the breakdown:

Property is a 3/1.5 end row home in a B-/C neighborhood with a strong rental demographic. All the numbers below are direct quotes from lenders, contractors, and insurance agents (exceptthe insurance expense as a rental).

Purchase: $25,000

Renovation: $21,000 (includes permits, no dumpster needed)

Closing Costs: $1250 (closing costs, appraisal for HML, title, etc.)

Holding costs: $4168.78

--6 months interest at 14% $2734.50

--Insurance quote for vacant house--$1034.28

--Utilities--$400

Total --$51,418.78

Points—$1577.22 (6 points)

Down Payment--$12,000

Amount owed to HML--$40,996

FLIP ANALYSIS

ARV: $80,000

Realtor commission 6%--$4800

Transfer Tax, Closing costs, etc. --$5000

Total Debits--$9800

Profit--$70,200(net proceeds)-$52,996 (HML+downpayment)=$17,204 profit

RENTAL ANALYSIS

Loan Amount--$52,996

--I will do a cash-out refinance through a commercial lender at 75% of the appraisal value, or $60,000. I haven’t decided whether to take the extra cash to use towards the next deal, or keep the extra $7,000 for my next deal.

Monthly Rent--$900

Mortgage--$284.49/month (amortized 30 [email protected]%)

Insurance--$45/month

Taxes--$103.95

Expenses--$180 (10% vacancy, 10% maintenance)

Capex--$90 (10%)

Expenses w/o mortgage-- $418.95

Expenses w/ mortgage--$703.44

Monthly Projected Cashflow--$196.56

A few notes:

1) I did not factor in property management, as I plan on managing for the foreseeable future, and would not consider hiring it out at least until rents are raised. Even if I must hire management immediately, I take $90 off and still cashflow at $100/month.

2) Capex—this should be over-estimated, as the entire house is being redone. There will be brand new plumbing, furnace, water heater, new kitchen cabinets, bathroom, etc. The only future capex would be the roof, which my contractor estimated has about 10 years left.

3) There is more work being done than in this analysis. The previous owner had a pipe burst in the basement and is receiving $17,000 from the insurance company. The seller is assigning these proceeds to me. That is where the new plumbing, furnace, etc is being paid from. Although I am considering this a wash for analysis purposes, I have an estimate to do the work for about $5,000 less, which will be used as part of my contingency funds.

4) Tenants are responsible for all utilities.

5) Tenants are responsible for lawn care and snow removal.

6) There is a detached garage in the back that opens to an alley.  I also plan on trying to rent that out for $50-75 a month.

What does everyone think?  It looks pretty solid to me.

@Jason Krick

Taking a quick look at your post I do not see vacancy rate or maintenance 

@Steve Smith @Nick Noon

Yes, I accounted for 10% for both, as well as 10% for CapEx.

So, to summarize the long post, I calculate close to $200 cash flow, $5000 for reserves from the insurance proceeds, cash-out refi where I could pocket another $5,000-6,000, and be into the property with no out of pocket money.

I also have the garage I may rent.

If you check some of my posts, I tell a bit of the story on this property.  The seller lost $3,000-4000 when her rehab materials were stolen.  I stated I would like to pay her back for that.  If the deal goes near to what I have above, she will get her money back and become whole.

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