Updated over 15 years ago on . Most recent reply
Deal analysis: SFH - Please Help
Hi everyone,
I would truly appreciate it if someone could analyze my numbers to see if this property is a winner. I’m considering making my first offer; this is my first Single Family property analysis. My RE strategy is to buy and hold (become a landlord).
Tax appraisal is $124,000
Listing: $90,000 (short sell listing price by bank)
Purchase price: 84,000 (I believe I can get it for this price)
Down: 20%
Finance: $67,200
Rate: 5.1 (30 year)
Closing cost: $5,000
Total cash outlay: $23,800
Monthly rent: $1,100 (Real estate agent tells me that this is very accurate)
Monthly P&I: $366
Monthly Hazzard Insurance: 1000/12 = $83.34
Monthly RE taxes: 3400/12 = 283.34
Estimated monthly Maintenance & Repair: $50
Estimated monthly misc. cost: $50 (such as vacancy)
Total monthly cost: $832.60
My monthly positive cash flow is $267. I was telling my wife that if we purchased the property at $84,000, we would have instantly equity of at least $30,000. More importantly, we have positive cash flow of $267 coming in each month (assuming no vacancy and maintenance & repair remain stable).
Property is in a decent neighborhood. Stable local economy.
Am I missing anything? Is my analysis flawed? This seems like a winner to me. Completely new to RE and any insight or guidance will really help me. Thanks.
Most Popular Reply
The tax assessed value means nothing. You should really get some good comparable sales nearby to estimate the current market value and ARV if any repairs are needed.
Using $50/mo is a 4.5 vacancy if the $50 misc was all vacancy. This might be light you would want to investigate the market. Safer to assume closer to 10% if you don't know the market.
When purchasing I often use 7-10% for management expense regardless of the fact that I will be managing it myself.
4.5% also seems light for repairs and maintenance. You want to factor in some kind of reserve for a capital expenses done the road as well. CAPEX expenses like a roof replacement will come up. I would not recommend deferring maintenance expenses because this usually ends up costing more over the long haul.
Based on the limited info provided this might be a good deal. Many here advocate the 50% rule and the 2% rule. These are good places to start when initially reviewing an investment.
Based on 50% rule
Rent 1100
less vacancy & expenses -550
Less P&I -366
Net expected cash flow 184/mo