AM I MISSING ANYTHING? Please analyze!!!
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 years@5%)
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.