Need thoughts on Potential Deal.

6 Replies

I've run the numbers on my first off-market property through networking with friends. I just did a walkthrough today, and the Property is Turn Key. Seller agrees to pay for cleaning. Because of another friend, I have intimate knowledge of the building and HOA. Only 8 units total. Here's the numbers:

Buy and Hold

The closest comp is across the hall.  3 years ago it appraised for 167k and sold for 150k.  It is identical, but has an additional balcony patio.  With this info I think 163k is fair for Actual Value Estimate?

2BR 1 Bath: Hard wood.  Modern appliances. granite.  jacuzzi.

Actual Value 163k

Seller is asking 134k.

25% Down = 33415k

Financed 30 yr = 100k  = $7000 annually 

Annual Expenses = $6000 with HOA, tax, Insurance, maintenance reserve

Rent :  minimum rent is $1200/month so $13680 annually minus 5% vacancy

With these numbers, looking at a $132 cash flow per month.  I feel I used pretty conservative numbers, and have 0 reservations about the quality of the property moving forward.  Built nicely, modern, and to last.

I really like these numbers for  a convenient, first buy and hold project.

Would love to hear everyone's thoughts.  What am I missing?

Thank you.

Are you managing the property or hiring a management co.? that will be another 120 / month if you hire. i came up with 1083 expenses, which leaves $117 ( 7000/12 = 583 and 6000/12 = 500). don't forget to figure in your closing costs as well. is $117 / month enough for you to manage the property, if you are not hiring a property manager ? and if you are managing, did you leave an allowance for advertising ?

Originally posted by @Patrick Liska :

Are you managing the property or hiring a management co.? that will be another 120 / month if you hire. i came up with 1083 expenses, which leaves $117 ( 7000/12 = 583 and 6000/12 = 500). don't forget to figure in your closing costs as well. is $117 / month enough for you to manage the property, if you are not hiring a property manager ? and if you are managing, did you leave an allowance for advertising ?

 I will be managing because of close proximity, time,  and an opportunity to learn.

Originally posted by @Andrew Syrios :

If you're confident in that ARV and the property doesn't need any repairs, I think it's solid. Rent/Cost is a little low, but the cashflow is alright and you have decent equity. Not a slam dunk, but not too shabby either.

 I am being very conservative on rent.  $1200 seems to be the average for the area, but the same condo that appraised for $167k and sold for 150k three years ago was renting for $1250 at that time.  I think $1350 is doable.

Jonathan,

It seems like an okay deal. I would make sure you have plenty of reserves for unexpected expenses. I would look very closely at the CCRs to make sure that they can't limit the ability for you to rent the unit down the road and if they do to make sure you are "grandfathered in" so you would still have the right to rent your unit and only future owners would not have the ability to rent their unit. Years ago I had a town home as a rental unit and the HOA tried to disallow rental units in the complex. Look closely at the the HOA are they in any lawsuits? or special assessments? Do they have a healthy reserve? Are the other owners paying and current to their dues? How other units in the 8-unit complex renting their units out. Some lenders will not loan to you if the % is too high in rentals in the complex.

Also in your lease make sure to put in an adendem or clause that if a HOA violation occurs that the tenant will be responsible for paying the violation. For example parking a car in a guest spot etc. Some HOA's get a powertrip and go a little unreasonable in accessing fines.

I hope this helps and good luck!

Originally posted by @Jonathan Warren :
Originally posted by @Andrew Syrios:

If you're confident in that ARV and the property doesn't need any repairs, I think it's solid. Rent/Cost is a little low, but the cashflow is alright and you have decent equity. Not a slam dunk, but not too shabby either.

 I am being very conservative on rent.  $1200 seems to be the average for the area, but the same condo that appraised for $167k and sold for 150k three years ago was renting for $1250 at that time.  I think $1350 is doable.

 If that's the case, it looks all the better and assuming it doesn't need much repairs, I would probably go for it.