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Real Estate Deal Analysis & Advice

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David Seale
Pro Member
  • Houston, TX
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Interesting Subject Property, Suffering From Analysis Paralysis

David Seale
Pro Member
  • Houston, TX
Posted Oct 24 2017, 09:57

Hello BP Members! Thank you for clicking through. My fiance and I are considering purchasing a newly built duplex in Houston. Its 2200 square feet, one unit on top, one unit on bottom. Both are 3/1's. Identical layouts. The duplex began being built in 2014, is unfinished and needs almost everything done on the inside minus plumbing and electricity. Floors, walls, appliances, drywall, a/c, etc. The exterior is nearly complete. 

Currently, the only method of purchase we've sought out is a hard money loan. I wish we could leverage a conventional loan but given the state of the units, we won't be approved. We really wanted too house hack this place. As far as money, most of our savings is tied up in stocks (AAPL). All of it has been accrued through an employee purchase program and purchased at discounts of 10-15% or through RSU's. Our plan is to liquidate SOME of this stock in order fund our first real estate investments. Technically we could fund this entire project ourselves but that seems silly. 

FWIW, there weren't tons of comparable data to reference. We only found a couple of MFH's sold recently in the area so conservatively speaking we're looking at $85 SP/SF. I should also state that the owner is a couple years delinquent on his taxes. On to the numbers...

Link to photos: https://app.box.com/s/6foj92rbaxy0kifb2n59x5o0jyxm92b4

Subject Property LP: $160,000

Purchase Price: $115,000

Rehab: $40,000

Total Funds Needed: $155,000

ARV: $187,000

Total Rent: $2000

Tax Rate: 2.54%, currently about $3,000 annually (assuming a spike after refi?)

HML Fees: 12% interest, 6 months term, 3 points at closing. They'll fund %75 of ARV.

Loan Amount: $140,250

Cash Needed To Close (including fees and closing costs): $23213.75, closing costs are estimated around $8,500 and includes a $750 processing fee. There is an additional $500 application fee.

Additional expenses: Insurance, $120?. 5% vacancy, 5% repairs, 5% cap ex, 0 mgmt fee, basing everything off of recommended percentages in the BP calculators. Since everything will be new, I assume costs are on the lower end.

Monthly Loan Payments are just a tad over $1,400.

Given this info, I've tried using the BP calculators and am a bit unsure of how to plug numbers in. Specifically as it relates to the HML portion. So, I figured I'd take it to the forum and get a feeler.

My first thoughts are that it doesn't seem we build a lot of equity in this deal, at least not right off the bat. Actually, I'm wondering if we even hit the 20% mark resulting in potential for paying PMI. Second, the monthly cash flow seems to be good. But I'm not confident with my numbers. Also, I'm trying to figure out exactly how much it costs us to borrow money. Is it as simple as adding all fees incurred during HML, refi, and holding costs?

Any help is appreciated. Analysis paralysis is a real thing. 

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