[Calc Review] Help me analyze this deal (Rookie)

[Calc Review] Help me analyze this deal (Rookie)

Realtor · Panama City Beach, FL · Member since 2018 · 122 posts · 63 votes

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hello! So I have been playing around with the calculators lately, trying to analyze multiple deals per day and really start to try and get an understanding of everything. While experimenting/ searching for a potential first property to purchase, I came across this set of duplexes in a neighboring city. After inputting the rough but hopefully conservative numbers, I have yielded some really remarkable results. To someone with more experience than myself, does this look as good as I think it does? It is 3 duplexes sold as a package deal. The purchase price I have set is $15,000 less than the current asking price, but it has been on the market for a few months now so I assume that to be reasonable, especially since this person is trying to offload a triple property package deal. The numbers include the current rent being increased by $75/mo (current rent is a little low). The difference in cash flow between managing myself or hiring a property manager is $478 when managed, and upper $800s when managed on my own. I would most likely hire a property manager for the size of the property. Does this seem like a good deal, especially seeing as it would be my first investment property? Is this getting myself into something too large for the start? Are my numbers reasonable? Thank you so much for your feedback!

0Reply
7 views

1 Reply

Jump to latestLatest
  • Investor · La Vernia, TX · Member since 2015 · 1k+ posts · 865 votes
    8y

    Howdy @Cody Smith

    Not sure where you are getting your financing information from.  But, this is considered a commercial purchase (not Residential).  Therefore, it would not be a 30 year term.  More like 20 years with a Balloon payment in 5 years.  The interest rate may be slightly higher.  You would also be require to put at least 25% as a down payment.

    Your numbers are more optimistic than conservative. When you analyze a property use current rental income. Not what you think you can get. The purchase price will be based on the current NOI and market Cap Rate. So it is important not to fudge numbers. If you truly want conservative estimates stick to the 50% rule. Example: I always want to be able to cover one month of rental income ($3,450) for my annual Vacancy reserves. That's 8.34% or $287.50 per month. The description says only 5 units occupied. You say you would most likely have a PM yet you didn't include that expense in the analysis. 10% is average so that's an additional $345. Even if you end up managing yourself always keep the PM expense in the analysis. Your time is worth something and if you decide later to add PM services it has already be included. Your CapEx amount may or may not be to low. It will depend on the current condition and life expectancy of the property's major components and appliances. You would need to have it inspected to determine the condition. Is there any owner utility costs? How is responsible for lawn care?

    As you can see your Cash Flow is not as good as you think.  I would stick to the 50% rule until proven differently by actual numbers.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.