Is This A Good Deal? My Analysis Numbers!

Real Estate Deal Analysis & Advice
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Is This A Good Deal? My Analysis Numbers!

J P.
Orlando, FL · Member since 2015 · 44 posts · 6 votes

Hello, all! Newbie here! Looking for my first deal within the next month. I found a place in the Pine Castle area of Orlando. It's in between Edgewood and Pinecastle (Would be off Oakridge and to the West of Orange by a hair).

Asking price is $96.9k. Looking at comps (and it seems to be a foreclosure), I'm thinking of my max offer being 80k so that was used for analysis. The home is a 3/1 with 1500 sq ft, which I think is HUGE! Also, to note, it has a pool. Looking at the pictures, it definitely needs a kitchen rehab and flooring as there has been some damage (some stripping of the tiles, appliances, and some of the cabinets removed). I'm thinking if I can do the painting of the inside and try to tackle the flooring (watching videos and shows), I can keep my rehab price below 30k. What do you think?

Anyway, here's my analysis! I hope you're able to see!

I do have a question on the analysis. I originally did it without the cost of rehab but in example below I included it b/c I wasn't sure if you include rehab costs if it's just a one time thing?

Without the rehab costs, the cash & closing cost is 18,400, making the cap rate 15.9 and cash on cash 66.9%.

With rehab costs (in case you can't see) cap is 15, and cash on cash is 27.8%.

Thanks so much for your help!

1Reply
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Wes Brand
Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
10y

Your returns are wrong. CoC is ~6%, not 15%, using your numbers (you put 44k cash into it, and you're getting back 2688/yr. You'll want to look at insurance with the pool, I suspect it'll be higher than 100/month. Also, pool maintenance will probably push your maintenance budget over 110/month.

Are you rolling capex and maintenance into the same budget? If so, think about how many years of life certain "big ticket" expenses (roof, furnace, hot water heater, siding) have left and how much it will cost to replace them and make sure you budget enough to cover that. 

I see no property management fees here. You should include them in your analysis anyway because otherwise you're working for free and likely to get sucked into a bad deal that only works because you're the one doing the PM. Generally mortgage is not included in the expenses column, because it's a debt-repayment / equity building thing. (don't get me wrong, it does reduce your cashflow, but it's usually accounted for differently)

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  • Wes Brand
    Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
    10y

    Your returns are wrong. CoC is ~6%, not 15%, using your numbers (you put 44k cash into it, and you're getting back 2688/yr. You'll want to look at insurance with the pool, I suspect it'll be higher than 100/month. Also, pool maintenance will probably push your maintenance budget over 110/month.

    Are you rolling capex and maintenance into the same budget? If so, think about how many years of life certain "big ticket" expenses (roof, furnace, hot water heater, siding) have left and how much it will cost to replace them and make sure you budget enough to cover that. 

    I see no property management fees here. You should include them in your analysis anyway because otherwise you're working for free and likely to get sucked into a bad deal that only works because you're the one doing the PM. Generally mortgage is not included in the expenses column, because it's a debt-repayment / equity building thing. (don't get me wrong, it does reduce your cashflow, but it's usually accounted for differently)

    4Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    @Wes Brand Hello! Thanks for responding. I have the cap rate at 15 and cash on cash at 27.8% with 44k put into it. Could you tell me how to fix the cash on cash, it did seem quite high? I have my formula for cash on cash as Yearly rent (13,200) - SUM of total expenses (820.08) / Cash Invested (44,400) = 27.8% From my understanding, the "cash on cash" includes mortgage and the "cap rate" does not? So my formula for cap rate was Yearly Rent - Expenses (minus mortgage) / Purchase Price. If this is wrong, someone please provide correct formula.

    Regarding expenses, I have expenses as B10 @5%. Should I use 10% instead or higher?

    I will add the property management, thanks! :)

    1Reply
  • Wes Brand
    Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
    10y

    Your expenses are monthly, not yearly.

    I am unfamiliar with pool maintenance. I haven't yet bought a place with a pool, but if I was considering it I'd research how much it costs to have them cleaned regularly in whatever market they're in.

    1Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    @Wes Brand Thanks so much for your help! You made me see that this would be a bad investment unless I can get it cheaper. Below is my new analysis. I changed my formula to make expenses yearly, added property management, and increased repairs to 10% from 5. This is what I got. It's even lower with added insurance and pool maintenance.

    0Reply
  • Marcus Adkins
    Orlando, FL · Member since 2016 · 18 posts · 2 votes
    10y
    Good morning J P. Bigger Pockets has calculators also... https://www.biggerpockets.com/real-estate-investment-calculator Good luck
    2Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    @Account Closed Thank you! I've used the calculator before but wanted to create something myself for a quick and simple analysis. 

    0Reply
  • Dan L.
    Real Estate Investor · Tampa, FL · Member since 2013 · 13 posts · 8 votes
    10y

    I will stay away from 3/1 SFH. The demand on 3/1 is a lot lower than 3/2.

    0Reply
  • Behrooz K.
    Spring Valley, NY · Member since 2016 · 55 posts · 21 votes
    10y

    @J P. your spreadsheet is nice. If you keep the fields separate (instead of combining for instance cash down and closing cost) it will be more clear and more informative. And then use formula fields to get sum or percentages, monthly, annual, etc. I think it will still be even quicker because you don't have to do any math yourself. 

    1Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    Thank you for the input @Dan L.

    I was thinking that a 3/1 wouldn't rent as high but with the square footage, I was hoping to be able to get a half bath if not a full one added. My current apt is only 1000 sq ft on a 2/2 and the master bath and guest bath are both a nice size in addition to the large bedrooms. The trade off is a smaller living room area and kitchen. Plus, we have a huge patio. 

    0Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    Thanks @Behrooz K. I thought about that after and was too lazy to shift everything down with my formulas. LoL! :) Great advice for the monthly an annual. Do you think it'd be better to add more analysis on spreadsheet 2 to decipher monthly vs annual to make it more clear?

    0Reply
  • Behrooz K.
    Spring Valley, NY · Member since 2016 · 55 posts · 21 votes
    10y

    @J P. I mean spreadsheets are so easy to make why not add all the details. If you don't want to use that field just leave the value at 0. 

    By spreadsheet 2 if you mean a second sheet, you can use multiple sheets if you find the sheet getting more crowded than you're comfortable with. Perhaps one sheet with all the details and second sheet for totals. 

    I find with my own sheets that they've been getting more and more complex the more I analyze deals so if I analyze a deal that requires more detail I update my template in case i run into a new deal which requires those details. 

    1Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    @Behrooz K. Haha Yes! They are! 

    Makes sense! Thank you!

    0Reply
  • Mike Hicks
    Real Estate Agent · tampa, Florida (FL) · Member since 2013 · 206 posts · 96 votes
    10y

    this is why i use the BP forms and calculators, I would spend hours trying to create and customize forms and end up forgetting something or doing it wrong lol plus the BP calcs are free and I can analyze a property in a couple minutes.

    0Reply
  • Wei-Der Huang
    Aliso Viejo, CA · Member since 2016 · 20 posts · 3 votes
    10y
    Just a thought. Create your spreadsheet where you can have plug and play fields. Create a cell that will house interest rate, property management %, insurance %, etc. and that way you can easily just change a couple numbers and have your analysis dynamic. That will give you the opportunity to compare different scenarios.
    0Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    @Mike Hicks Hello! I've used the form before, I just like seeing the formulas and numbers myself. More hands on approach than just plugging in on a site. I feel I learn more that way. Trial and error. :) Thank you for responding!

    0Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    @Wei-Der Huang Thank you for the suggestions! I will definitely try that out! I have the property mgmt as a percentage but it will definitely be helpful to add the other two!

    0Reply
  • Account Closed
    Falls Church, VA · Member since 2016 · 33 posts · 36 votes
    10y

    Hi J P.,

    I definitely understand the frustration. There's nothing wrong with waiting a bit longer until you've saved up some more. Do you mean the monthly rent isn't much different than the mortgage payment for a cheaper property?

    If you feel like you're not finding the right options, you can request city data reports from Mashvisor of Orlando and/or Tampa. Maybe you will find an option from there - with all the numbers being presented at once. 

    Until you decide to buy a property, maybe you can consider Airbnb as an option to get some extra income to save up. Don't feel discouraged, people have invested in real estate starting out with less than 10K and now they're very wealthy. 

    PM me if you want to chat more about the different approaches you could take to investing.

    Good luck to you :-) 

    0Reply
  • Ghenia Flewellyn
    Investor · Fort Lauderdale, FL · Member since 2015 · 83 posts · 51 votes
    10y
    Originally posted by @J P.:

    Hello, all! Newbie here! Looking for my first deal within the next month. I found a place in the Pine Castle area of Orlando. It's in between Edgewood and Pinecastle (Would be off Oakridge and to the West of Orange by a hair).

    Asking price is $96.9k. Looking at comps (and it seems to be a foreclosure), I'm thinking of my max offer being 80k so that was used for analysis. The home is a 3/1 with 1500 sq ft, which I think is HUGE! Also, to note, it has a pool. Looking at the pictures, it definitely needs a kitchen rehab and flooring as there has been some damage (some stripping of the tiles, appliances, and some of the cabinets removed). I'm thinking if I can do the painting of the inside and try to tackle the flooring (watching videos and shows), I can keep my rehab price below 30k. What do you think?

    Anyway, here's my analysis! I hope you're able to see!

    I do have a question on the analysis. I originally did it without the cost of rehab but in example below I included it b/c I wasn't sure if you include rehab costs if it's just a one time thing?

    Without the rehab costs, the cash & closing cost is 18,400, making the cap rate 15.9 and cash on cash 66.9%.

    With rehab costs (in case you can't see) cap is 15, and cash on cash is 27.8%.

    Thanks so much for your help!

    Hi JP!! I'm a few hours down the road road from you and wanted to welcome you to Fl! Good luck on your REI journey. You're definitely on the right path.

    0Reply
  • Ghenia Flewellyn
    Investor · Fort Lauderdale, FL · Member since 2015 · 83 posts · 51 votes
    10y
    Originally posted by @J P.:

    Hello, all! Newbie here! Looking for my first deal within the next month. I found a place in the Pine Castle area of Orlando. It's in between Edgewood and Pinecastle (Would be off Oakridge and to the West of Orange by a hair).

    Asking price is $96.9k. Looking at comps (and it seems to be a foreclosure), I'm thinking of my max offer being 80k so that was used for analysis. The home is a 3/1 with 1500 sq ft, which I think is HUGE! Also, to note, it has a pool. Looking at the pictures, it definitely needs a kitchen rehab and flooring as there has been some damage (some stripping of the tiles, appliances, and some of the cabinets removed). I'm thinking if I can do the painting of the inside and try to tackle the flooring (watching videos and shows), I can keep my rehab price below 30k. What do you think?

    Anyway, here's my analysis! I hope you're able to see!

    I do have a question on the analysis. I originally did it without the cost of rehab but in example below I included it b/c I wasn't sure if you include rehab costs if it's just a one time thing?

    Without the rehab costs, the cash & closing cost is 18,400, making the cap rate 15.9 and cash on cash 66.9%.

    With rehab costs (in case you can't see) cap is 15, and cash on cash is 27.8%.

    Thanks so much for your help!

    Hi JP!! I'm a few hours down the road road from you and wanted to welcome you to Fl! Good luck on your REI journey. You're definitely on the right path.

    0Reply
  • Account Closed
    Lake Mary, FL · Member since 2014 · 118 posts · 54 votes
    10y

    @J P.

    Looks like you are on the right track. I am working with investors buying and holding in Central Florida as well with helping a couple funds buy in Florida. I don't like this deal for multiple reasons and I know you can do better. If Tampa is a little farther than you want to go look at Deltona, Poinciana, Winter Haven and Lakeland. I have turnkey in these areas that are netting 5-8% that I am helping sell. With you being boots on the ground you can get that a little higher. Mls is very competitive and patience is key. I work with a wide variety of lenders from conventional to private. Let me know if I can answer any questions for you. 

    2Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    Thank you! @Ghenia Flewellyn

    0Reply
  • J P.
    OP
    Orlando, FL · Member since 2015 · 44 posts · 6 votes
    10y

    Thank you @Account Closed I will send you a PM. 

    0Reply
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