Analyzing a potential Turnkey wholesale

7 Replies

I analyzed this one property just to see what's out there. Any Feedback would be greatly appreciated.  Analysis: Townhome

3 bed 2.5 baths 1800sf rent ready(light cosmetic repair is optional) rent is 2000 a-month purchase price is 255k expenses come up to about 800 per month(property taxes, insurance, vacancy rate 10%, property management 10% and repairs 5%) leaving about $1200 cash flow. Cap rate is about 5.5%. In order for this to work it would have to be a cash purchase. If it were financed the cap rate would be negative resulting in a negative cash flow. Comps were pulled of zillow only sky view pictures were available.


Comp #1
3 bed 2 bath
1,770 sf
Sold 7/21/15
285k
Condition: Unknown
Comp#2
4 bed 2 bath
1173 sf
Sold 5/28/15
280k
Condition: unknown

if cap rate is 5.5% why would it be negative cash flow with financing? What is the interest rate you are planning to borrow? Rates are so low nowadays. For a 200000ish loan you should be paying about 1000ish a month for a thirty year fixed. 

@Jose Gandulla

This is not a good rental.

Your mortgage payment is going to be about $1200. 228k loan, 30 years at 5%.

I recommend breaking out the expenses.  5% expenses on 2000/month is only $100.  This is much too low.  The minimum you should have in this slot is $150.  More if this is an older house.

As a rental, this place is not going to make anyone any more.  It is also a lousy a flip for you.  If you want me to run a full analysis, let me know.  (Tag me in this thread with the request)

@Jose Gandulla , anyone out there with $255k cash, ain't buyin' this!

Please, don't pay retail (which turnkey is), then expect to sell for a profit.

(Remember also, that higher comp was a 4 bedder).

That was good practice for analyzing though. Now, go find the same sort of property, but which you might get for maybe $70k cheaper (because of extra rehab costs needed, which you calculate to cost you say, just $15k). Then run those numbers, and share here again. Thanks...

Any property that you have to say "this would have to be a cash deal for it to work" really means it's not a tremendous deal. 

That cap rate is pretty low, on a decently high purchase price, with the rents not really covering it, and on a property that still needs some work?

If this is an area you are set on or for some other reason this is the best of the options, maybe. But there are definitely better deals out there.

@Brent Coombs, @Aaron Montague, @Curt Davis, @Chris Seveney, @Nazz Wang, 

Thanks everyone for the feedback! HOA and Cap Ex were two items that I completely forgot about. My objective as a wholesaler is to look at these properties from the end-buyers point of view. Find out how these properties can work for them. Aaron I would greatly appreciate a detailed analysis. I could use the Calculator here, but I want to understand myself first how the numbers work. Anyone can present a piece of paper but if I cant explain it in a language a potential buyer can understand that paper is worthless. I'll definitely run some more properties for review!