Help analyzing a buy and hold deal

3 Replies

Hi there,

I'm looking at condo as a buy-and-hold investment, but I cannot get the numbers to work, no matter how I cut it. So I'm wondering if I'm missing something, or the deal is actually just not worth it. If anyone is interested in going over these numbers and giving me their thoughts, I'd appreciate it:

Purchase price: $190,000

Improvements: $10,000

Closing costs: Approximately $7k

Downpayment: $19k

Interest rate: not 100% sure, but probably around 4.5%

Mortgage length: 30 years

Rental income: $1500 p/m

Vacancy: 8%

Property Taxes: $4,500

Insurance: $750

Property Management: 7%

Maintenance and repairs: $2,000 per year

Advertising: $300 per year

Utilities: $200 per year

HOA: $329 p/m

With all that added up it leaves me $558 in the red every month, if my calculations are correct. 

Anything else I'm missing, or do any of those numbers look off to you? And my other question is, under what circumstances would this deal make sense? Significantly lower purchase price? Higher rent?

Thanks in advance for your help!

@Huw McDonald

Considering that you are buying this for investment and looking at the numbers that you have provided, the answer is simple: it is not a good deal.

You’ll be significantly out of pocket every month for the privilege to be a landlord and you’ll subsidizing the lifestyle of your renter and exposing yourself to significant costs down the line if your tenant is a troublesome or trashed your property.

For the same numbers to make same, you’d would have to make a much larger down payment.

Assuming that you are paying full market value, (which the numbers tend to suggest), it makes no sense to go in that deal

It could make sense to go into a deal like that if the property is selling at a discount and you’d have some equity built-in right after purchase.

Maybe there is a significant upcoming development close to the location that you are buying that would make your property more desirable.

If you have those facts and know that particular market well, then ok.

But recognize that what would be do is essentially speculative “investing” than value investing

Its a bad buy n hold.   UNLESSSSSSSS you see appreciation potential.

I bought a 3% cash on cash return property in a resort town.   It was an appreciation play.   In a little over a year prices have shot to the    I was hoping prices go up in 10- 20 years not one.    But thats RE.

Howdy @Huw McDonald

Are you sure you can do 10% down payment? Normally it is 20%. Maintenance and repairs seems a little high. Are you including CapEx? If so it is low. Make sure you include it.

Purchase price to rent ratio is too low.  $1,500 / $190,000 = .79%.

I hate Cash Flow killing HOA's. That's why I stay away from condos.

This is no deal.

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