# [Calc Review] Help me analyze this deal

8 Replies

Please help me analyze this property. The price sounds too good to be true. I ran all the numbers in the calculator and looks great. The only drawback I can think about is the neighborhood. The vibe I get is that it is very conservative and maybe I wont feel comfortable living there. Also, I didn't include insurance in my analysis. Don't know what would be a good number for this house. Any feedback will be very much appreciated.

Thank you

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

@Juan Rosado It looks good to me! I am guessing you are using FHA since there is only 3% down and a pretty good interest rate.

Only two numbers that really concern me are the renovations number of \$2k (that won't go far in fixing up a place unless you are doing the work yourself) and your property tax is 1.2% of the sale price. In North Texas our property tax tends to be between 2 - 2.4% of assessed value. The value will be reassessed when you purchase the house and will go up substantially. You can fight it somewhat but it is tough to go in to the CAD office saying you over paid for the property and the assessed value should be less than you just paid for it.

Even with both those numbers being doubled, you are still looking at a pretty good deal. It is tough to find anything that is close to cash flowing in Dallas right now.

Hi Juan! Check the property tax laws in tarrant county. The current taxes are really low, only \$1400 which is based on a property value of \$65k. Different states have different tax laws, some which require the property to be reassessed for tax purposes upon the sale of the property (like here in CA) which would increase you're taxes pretty significantly. The tarrant county tax assessor site includes a tool that allows you to see what your tax bill will be based on certain criteria. If For your purchase price of \$150k your tax bill would jump from \$1400 to \$4177 if you're not owner occupied or \$3600 if you decide to live there and rent out the other half. Their website says that taxes are reassessed every year but doesn't say if it goes up on the sale of the property or not. Definitely something to look into as it would have a big effect on your ROI.

Also for the loan it appears you'd be doing a 3% FHA loan which would include a PMI payment. Make sure you add that in as well. For insurance, I just purchased a 3bed 2bath in Chicago for \$135k and the insurance on that is \$68/mo. If you budget \$80 you'd probably be fine. You can always call insurance companies and get a quote even before you buy the property if you want a better estimate for your area.

@Ryan Blake beat me to the punch on the taxes! I need to type faster :)

@Juan Rosado it is possible that the taxes you are seeing are only for one side of the duplex.  Double check that the lot description includes both sides of the duplex so that you can get an accurate number for taxes.  I agree with @Ryan Blake that 2-2.4% is a good estimate depending on the area.  If you need help calculating it send me a direct message and I'll look at it closer.

This analysis is good for after you move out (If House Hacking). You need to analyze it also as if you are living there. Meaning you get Rental Income from only one unit (not both). I also believe in being conservative going into deals. Your reserve withholdings are to low for me. I never go below 8.34% (one month rent) for Vacancy. I prefer to have at least 12% - 15% combined for CapEx/R&M. It depends on the age, current condition of the property, and quality of tenants. Until the property is inspected you really don't know what the condition and life expectancy of all major components and appliances are. Once that happens you can adjust your numbers accordingly.

Is \$150K the Asking price or your Offer price? What is the current Fair Market Value/ARV?

Is there any common area utilities that the owner is responsible for?

The likelihood of you having positive cash flow while House Hacking is very slim.  But, that is normal using a Duplex for this strategy.

Make the adjustments we have recommended.  Then see what the results are for both while you live there and after you move out.  If it meets your criteria then go for it.

Originally posted by @Ryan Blake :

@Juan Rosado It looks good to me! I am guessing you are using FHA since there is only 3% down and a pretty good interest rate.

Only two numbers that really concern me are the renovations number of \$2k (that won't go far in fixing up a place unless you are doing the work yourself) and your property tax is 1.2% of the sale price. In North Texas our property tax tends to be between 2 - 2.4% of assessed value. The value will be reassessed when you purchase the house and will go up substantially. You can fight it somewhat but it is tough to go in to the CAD office saying you over paid for the property and the assessed value should be less than you just paid for it.

Even with both those numbers being doubled, you are still looking at a pretty good deal. It is tough to find anything that is close to cash flowing in Dallas right now.

Ryan, so you're telling me that on the "annual property taxes" part of the calculator I should change it to \$3,600 (\$150,000*2.4%) instead of 1800? Why would you say that his is a good deal since it goes from \$160 in monthly cashflow to \$14? ROI being 1.58%.

@Juan Rosado Because if you put 20% down you would have an 8% cash on cash return. If you manage it yourself, you would realize an 11.5% cash on cash return.

... But that all being said as I reviewed the numbers because this was from 2 days ago I noticed your are forgetting insurance in your number or at least I didn't see it when I was quickly reviewing your numbers.

In DFW that is about as good as you are going to get. The market for multi family including apartment buildings is over inflated and cap rates are horrible for buying. This is why people are moving outside of the metroplex and why the midwest is the new go to place. There are deals out there but you are going to have to search and probably go outside of the MLS.

Good luck in your analysis and continued search.

Originally posted by @Juan Rosado :

Please help me analyze this property. The price sounds too good to be true. I ran all the numbers in the calculator and looks great. The only drawback I can think about is the neighborhood. The vibe I get is that it is very conservative and maybe I wont feel comfortable living there. Also, I didn't include insurance in my analysis. Don't know what would be a good number for this house. Any feedback will be very much appreciated.

Thank you

View report

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

I think you are missing insurance, and I think your property taxes might be a little light.

If it is a house hack, I think it is  decent purchase.  But if it is a pure investment, by the time you add insurance and property taxes, I think it will not cash flow.

I would also check to see if you have enough for initial repairs.  I don't think we have ever bought a property we didn't end up spending a couple thousand dollars on to get ready for first time tenants.